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Stock Market Has Stress Fractures but No Clear Breaks

ByMichele Schneider
Published 10/19/2023, 02:46 AM

Considering EVERYTHING:

  • Yields and mortgage rates
  • War
  • Inflation and rising commodity prices
  • Bank stocks falling
  • Risk Gauges 2 out of 6 now risk-off

To name a few, why then is the S&P 500 so strong?SPY-Monthly Chart

Here are a few reasons:

  • Fed members suggest rate hike pauses.
  • Hope that the war lateralizes rather than escalates.
  • Economy stats mixed with retail sales and labor strong.
  • Sidelined cash in money markets could move into equities.
  • Seasonally, Q4 and pre-election years are historically strong.

Besides the SPY chart, we are also watching the price in small caps.

I feel like I have written the same themes repeatedly. It’s almost like a mantra:

  • Watch price and timeframe in the economic modern family
  • Watch commodities
  • Watch risk gauges

And here we are still stuck in time as time seemingly stands still amidst the increasingly faster speed and plethora of news.

The SPY monthly chart is not bearish.

It could turn out that way, but presently, SPY sits atop the blue line or 23-month moving average.

We have 2 weeks left in October, so we are watching the 418 level carefully.

We are also watching 450 as resistance carefully.

After all, a trading range is not only possible but also plausible.

IWM-Monthly Chart

Small caps look more vulnerable.

Hence, we look to them to tell us what’s next.

Negatives:

A declining slope on the 23-month MA

A narrowing between the 23 and 80-month MAs

An unimpressive bounce off the 80-month MA (green line).

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Positives:

(IWM) is still above the 80-month MA

His wife, Granny Retail XRT is potentially making triple bottoms off of the October 2022 lows.

Tune out the noise and follow the charts.

ETF Summary

  • S&P 500 (SPY) 440 resistance 429 support
  • Russell 2000 (IWM) 177 resistance 170 KEY support
  • Dow (DIA) 344 resistance 332 support
  • Nasdaq (QQQ) 368 resistance 363 support
  • Regional banks (KRE) 39.80 -42.00 range
  • Semiconductors (SMH) 150 resistance 140 support
  • Transportation (IYT) 237 resistance 225 support
  • Biotechnology (IBB) 120-125 range
  • Retail (XRT) 57 key support if can climb over 62, better

Latest comments

There are a few stocks holding this "market" up, one of them was Tesla, which looks super weak now.  The other big tech companies have also looked stronger in the past. Tesla starts to drag NDX down and the others might follow.  The clear break might come, but many stocks are already inexpensive while the "magnificentently overvalued 7" have way to fall.
Why is the SP500 so strong? Because stock market has never been based in reality, and needs resets through crashes (after which economists scramble about, in vain trying to understand why the ponzi scheme doesn't actually work).
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