Can The Stock Market Bulls Pass This Test?

Earlier than the month-to-month jobs report on Friday it appeared that solely a weaker-than-expected jobs report may increase shares. After the sharp market reversal on Wednesday in response to Fed Chairman Powell’s feedback shares had been hit arduous once more from Thursday’s open. The S&P 500 dropped beneath the broadly watched degree of 3700 in early buying and selling and the Nasdaq Composite declined 1.7%.

The roles report got here in a bit higher than anticipated and that didn’t assist the market’s tone as shares offered off Friday morning and dropped again to Thursday’s lows earlier than lunch. Technically it was a very good signal that these lows did maintain because the S$P 500 had a low of 3708.94 on Friday which was above the Thursday low of 3698.15.

By the shut at 3770.55 over 60% of the S&P 500 shares had been greater for the day. On the NYSE there have been 2250 points advancing and simply 915 declining. For the week the NYSE A/D numbers had been adverse and regardless of the 1.4% achieve for the S&P on Friday, it was an unsightly week with numerous crimson on the weekly abstract.

After the tough earnings season for most of the giant expertise shares, it was not shocking that the Nasdaq 100 dropped essentially the most down 6% because it closed the week down 33.5% year-to-date. By comparability, the three.4% decline within the S&P 500 was not too dangerous. The Dow Jones Industrial Common solely declined 1.4% as early in October the relative performance analysis indicated it was main the S&P 500.

The iShares Russell 2000 (IWM
IWM
) was beneath strain because it dropped 2.5% whereas the losses within the Dow Jones Transportation and Dow Jones Utility Common had been minor. The SPDR Gold Shares had been greater Friday and up 2.2% for the week although down YTD. The extra broadly based mostly NYSE Composite was down simply 0.62%.

The patterns from the day by day advance/decline strains do counsel that Friday’s achieve was important and that shares are prepared to maneuver even greater forward of the CPI report on Thursday. The Spyder Belief (SPY
PY

SPY
) dropped beneath the month-to-month pivot at $374.61 on Thursday and Friday however then closed above it at $376.35. A powerful shut above the resistance at $389.90 (line b) would set the stage for an extra rally into the top of the 12 months.

The S&P 500 Advance/Decline line has dropped again to its rising WMA earlier than turning greater Friday with the optimistic A/D numbers for the day. That is typically a really bullish setup when the WMA is rising. It requires sturdy A/D numbers early within the week which might transfer the A/D line above its latest highs forward of costs. If as a substitute there are weak A/D numbers it might flip the A/D line decrease and drop it beneath its WMA.

Although the Nasdaq 100 ($NDX) has been one of many weakest market averages it additionally exhibits optimistic indicators as after dropping beneath the month-to-month S1 help at 10,670 it closed up 1.56%. The declining 20-day EMA at 11,192 and the month-to-month pivot at 11,176 are the following limitations on the upside. There may be key resistance at 11,712, line a.

The Nasdaq 100 Advance/Decline line broke its downtrend, line b, on October 24^th which indicated the decline from the August excessive was over. The A/D line dropped beneath its WMA on Wednesday however then closed again above it on Friday. That is one other probably bullish setup however wants optimistic A/D numbers early within the week to substantiate

Yields rose late within the week with the two 12 months T-Observe yield making a brand new excessive Thursday and Friday. It reached my chart targets from early in the week however then closed decrease Friday. This was an element serving to shares to rally although the market internals had been already optimistic early Friday regardless that costs had been decrease.

If charges transfer sharply greater early within the week then it is going to be tougher for the bulls to finish the inventory market backside. I’m watching the two 12 months T-Observe yield for a detailed beneath 4.268% or a violation of the help at 3.911% within the 10 12 months T-Observe yield to substantiate a high.

There are various shares and ETFs which might be displaying up on my bullish scans. Stericycle
SRCL
(SRCL) closed on Friday, October 24^th at $44.17 nicely above the prior week’s doji excessive of $42.58. This triggered a weekly purchase sign and was accompanied by the transfer within the weekly OBV above its WMA.

SRCL was up 6% final week and the relative efficiency (RS) moved above its WMA indicating it’s a market chief. The OBV has moved additional above its WMA and the resistance at line b. The August excessive at $55.31 is the following upside goal.

If the inventory market is robust this week with optimistic A/D numbers I feel the outlook will change into way more bullish. Till then remember to goal your purchase areas rigorously and watch the danger on any new positions.