In a continuation of the pullback that started in September, the S&P 500’s Market Forecast shows a weak bearish intermediate posture (green line) and long-term Market Sentiment (orange line). This occurring as the selloff accelerates.
In fact, the intermediate line dropped back down below the Market Sentiment line and is close to crossing below the chart’s midpoint (like the Dow Jones Industrial’s did today), which would reflect a strengthening bearish posture.
The Russell 2000 finally joined the party with a weak bearish posture and falling six-week SMA.
The weekly chart shows a strong bearish Heikin Ashi candle, which suggests we may get another one or two weeks of weakness as head down towards the 200-day MA. Also, different oscillators confirm the weakness with bearish signals across the board – even if continued weakness may not be as excessive as we saw today or Monday.
Volatility finally jumped to high levels relative to longer-term volatility levels (VIX to VIX3M). In fact, the 105% mark reflects the intermediate pullback and suggests we may be getting the worst of the volatility at the end of the decline (now) with small moves down towards Fibonacci support to finish the bout of weakness. However, that may still be another week or two away.
Not seeing a broad risk-off move in gold, commodities and US dollar – just pullback moves towards support – similar to what’s expected in U.S. equities. On the other hand, Developed Markets are getting hammered by more COVID lockdowns while Emerging Markets are emerging as a strong alternative for risk appetite.
Financials, Industrials and Materials have been the weakest sectors this week, which suggests we are not getting a broad rotation from tech to these “small-cap” sectors. Once we get through this bout of volatility, there’s a good chance Technology, Discretionary and Communication Services lead us back up again.
Stock Market Video for Traders – October 29, 2020
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