The market has a penchant for not following through with the obvious, and we got that in spades with Friday’s fade. It seems like just yesterday when I was standing up and applauding all the strong moves abounding throughout the major market indices. Now, I must take pause and wring my hands with the rest of the audience.
Most notable is that the S&P 500 has already tucked its sleepy head back under the upper channel line (downward trending) that I am sure every good technician is watching like a hawk. We cannot know how this latest drama will resolve itself, but we should take note that the S&P leaned back right at the June highs. It is possible we just confirmed a new line of resistance. On the flip side, on-balance volume remains in a strong up-trend. These are two powerful forces colliding now. Finally, both the DOW and the NASDAQ have convincingly leaned back from their upper channel lines (downward trending). Amazing how quickly the market can turn hope into anxiety!
The week ended with a lot of stocks that decided to lean back from lofty and important levels. Many of the stocks I quickly noted in my intro piece as showing nice up-trends as they hit 52-week highs have already run into some trouble. I guess I should have kept focus on the oil sector!
Anyway, MIK was the most notable disaster. On Wednesday, MIK gapped down ahead (hmmm…) of a disappointing sales report. The follow-through was swift and unmistakable. The overall up-trend remains intact, but MIK has taken a hard 10% correction back below its 50 DMA. FDX failed to make a new high, but volume was lower than average. And SBUX, a stock that I did not mention earlier, has chopped around its highs as traders/investors disagree over whether Starbucks sales are finally slowing down for good.
One thing is for sure…the on-going relative weakness in the job market will continue to prevent the Fed from getting aggressive in hiking rates in the near-term. And sure enough, the 10-year treasuries now look ready to resume the downward trend in yield that has occurred even as the Fed has been lifting rates. Two more powerful forces on some kind of a collision course.
Outside of the oil complex, mainly gold and utilities continued their happy trails on Friday. Be particularly alert when the market decides to resume printing consistent signals across the indices. Most of us know that October’s have historically been fodder for lots of market drama. Time to lean back and chill…? It could be this coming week. Mike’s most hated week of the quarter is upon us: options expiration and the launch of earnings season.
Be careful out there!
Good wrap up of the action. I can picture exactly what the charts look like from your description. And yeah, you know me so well. i could not have timed this vacation better. I was beginning to get woried that I might miss an upside move but I think my initial call for a bit of a puase may be more accurate. I´m glad you pointed out that options expiration is coming up. That makes me all the less anxious to get back into the mix. Still, I can´t wait to see what my scans pop up.
I wondered if all the markets being in full-blown positive territory was a sure sign of the last fools being sucked in.
If you notice, the S&P500 weekly chart made a nice shooting star, just at the top of its trend line. I got news for you, the pain at over yet.
Welcome back Mike!
The weekly and 9-day charts make the S&P “break-out” look much less convincing. The small-cap chart looks much better in this respect. So much for this year being the year the big boys out-pace the little guys!
FYI – Mike is still away…he just keeps nervously checking in as I spray paint away… ;D
Ah I see, Mike is scared that you’ll take away all his readers! hehe! Duru, I’m rather enjoying your daily commentary. You should really think of running a blog like Mike!
Keep that grafitti coming Duru!
Tom, I’ve been trying to get Duru blogging for a while now, I think he may finally be hooked.