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A strong October ends with a dip

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Stocks fell on Thursday, a post-Fed day, and a post-Apple earnings day, and by the close we saw Wednesday's gains in the Dow and S&P get reversed. The Dow lost 140-points but that was well off the morning lows of the day so we did see some buying in the afternoon session. Small caps and the Transportation Index lagged again, but the Transports got a nice bounce off its 50-day EMA.

Daily TSP Funds Return

Getting a 140 point loss in the Dow and a decline in the Nasdaq on a day that saw Apple up 2.3% in kind of unusual, so while there wasn't a sell the news reaction to Apple's strong earnings report, there was one for the broader market on the day after a rate cut. That's been a trend of late, and with stocks at or near all-time highs, there could be some room for a little exhale from the indices before we get the normal holiday bullish bias.

The start of November does have a bullish bias so maybe the bears won't be too aggressive for the first few days, but as we get into the middle of the month we could see a combination of some profit talking with stocks near those highs, followed by dip buying as we head toward Thanksgiving, and eventually into December and the "typical" Santa Claus rally to end the year - which of course did not happen last year.


Chart provided courtesy of www.sentimentrader.com


The weekly chart of the S&P 500 shows that it could be up against some strong resistance. This looks like it may want to break soon since the pullbacks keep getting more shallow, but I suspect the bears could make some short-term moves to try to push back here, despite seasonality being on the bulls' side right now.




The House of Representatives did pass its vote on an impeachment inquiry on Thursday and that may have contributed to some of the midday losses, but we obviously closed off the lows so it was more of a non-event, although there's a long way to go here.

The October jobs report comes out today (Friday) and estimates are looking for a gain of 90,000 jobs, and an unemployment rate of 3.6%. That 90K is a low bar and some of that has to do with the strike at General Motors, but being that a deal has now been reached there, this needs to be a "one off" low number or the market won't be happy.



The S&P 500 (C-fund) stalled on Thursday after hitting a new high on Wednesday, and that's been typical action after a Fed meeting recently. It remains in the rising trading channel, put in a decent reversal, and closed above the prior highs, so the bulls were not going down easily. As we mentioned above, seasonality is on the bulls side for a couple of weeks, but that comes on the heals of a big 4+ week rally off the recent lows, so we'll see if stocks need to take minute to rest before trying to push on.




The S-fund continues to lag but did find support near the old descending resistance line and bounced off the lows. But the 0.7% decline did push it below the rising support line and support once broken, can try to act as resistance - just as that old blue resistance line is trying to act as support now.




The Dow Transportation Index fell hard again on Thursday but there was buying once it hit the 50-day EMA, and it's just resting near that rising support line. Before it declares victory, a bounce off the 50-day EMA is not unusual on its first attempt but it doesn't mean it won't try again soon. That's a pretty sharp drop off the recent highs and any bounce might only create a bear flag like it did in September.




We're seeing some of the economically sensitive markets falling back from overhead resistance at the 200-day EMA. Copper had a nice run in October but it pulled back hard from that 200-day EMA yesterday. There is a rising channel being tested right now.




The price of oil also pulled back recently from the 200-day EMA, which it has done repeatedly in recent months, with the only real exception being the spike up after the Saudi oil fields were attacked in September, but that was a short-lived rally.




The price of gold has been hovering near the 50-day EMA for quite a while and yesterday's rally saw it close above the descending resistance line off of the recent highs, for the first time. This may be ready to test that old high again.




The AGG (bonds / F-fund) gapped up and followed through on Fed day's rally with another big rally that broke above some key resistance - the old rising support line. That makes things interesting. If the safety trades of bonds and gold are going to rally, the stock market better take notice.




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Thanks for reading. Have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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