[newsletterchapter2 title=”GENERAL MARKET COMMENTS”] The BABA Reversal on 9/19 Told as of an interim High. A wonderful decline to a double bottom near 1925 S&P. Weakness has produced very low daily Sentiment including two separate 1% readings.
The Bids from the double Low near S&P 1925ish now looks like it has some durability. Maybe that was a “Buy the Dip?” There is still volatility and turbulence ahead.
[/newsletterchapter2][newsletterchapter2 title=”MARKET TIMING FACTORS”] The 9/19 Spike node was Significant. The profile for a Negative Price Magnet (Black Hole) due into 10/13ish has kept Stocks under pressure.
Stocks have also been in a Seasonally weak period. As I noted, the Black Hole has already had its generic corrective effect. So, next week should continue to be volatile but the short side seems washed out. A more defined Low may come nearer to the Elections.
[/newsletterchapter2] [newsletterchapter2 title=”MARKETS AS METAPHOR”] Financial Culture Complacency was shaken by recent downside Volatility. That cascade of Negatives may have been discounted on the plunge of 10/7. Note that the Low was synchronistic with the first U.S Ebola death. The Recovery was attributed to a Fed statement which was only the familiar trope of continuing Low interest rates. It is a tired but effective salve.
[/newsletterchapter2] [newsletterchapter2 title=”RELATED MARKETS”] Gold reversed and the Dollar reversed. Energy got a great bid too. These combinations are tactically compelling. Treasuries flailed but could not reverse down importantly.
[/newsletterchapter2][newsletterchapter2 title=”SENTIMENT INTERPRETATION”] The best Sentiment interpretation is that the BABA hyperbole on 93% Bullish registered an Interim High. Now, there have been two exceptionally Low sentiment readings of 1% Bullish. These sentiment “Snake Eyes” both occurred after big daily price plunges to support at 1925 S&P. The robust recovery from that level on 10/8 appears to be some degree of low. Good time to stand aside for a bit.
[/newsletterchapter2] [newsletterchapter2 title=”THE TECHNICAL VIEW”] The SPX found buyers at near the 78% support level, which also formed a double bottom. The rally brought the SPX right to the 50% resistance line and now it is time for battle. The bulls are NOT out of woods, as there is a plethora of resistance between the 1972-1983 area.
If they can break above and hold that resistance, they will have gained control of the tape again. Until that happens, the bears still have the ball. If weakness shows up and the bulls lose the “double bottom” support, we could see some panic and the 1900 would most likely come quickly. That is an important line moving forward. We are in no mans land and sidelines is not a bad place to be-until we see who wins this battle.