Market Needs To Prove It

Monday’s Session

The S&P 500 (SPY) got off to an impressive start Monday, at one point posting a gain of 48 points. Once again selling conviction picked up producing another ugly set of daily candlesticks.

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Early in the session, today’s high exceeded Friday’s, which is what we want to see (compare A to 1 ). Then, the market reversed sharply and dropped below Friday’s low (compare B to 2), which adds to the concerns we had at the end of last week. Price was also rejected near 2700.

short-takes-ciovacco-oct-29-2018.png

As shown in the chart below, the market also recaptured the 61.8% retracement intraday, and then closed well below it (the attempt failed). More detail on the concept of retracements can be found in a September Seeking Alpha post.

short-takes-ciovacco-capital-spx-10-29-2.png

We have the same concerning “failed attempt” look on the daily chart of the NASDAQ (QQQ).

short-takes-ciovacco-capital-spx-10-29-23.png

Why A Big Move Could Still Be In The Cards

This week’s stock market (VTI) video kicks off with a set of observable concerns and then takes a hard look at both the bullish and bearish cases.

The market (VOO) needs to show us something that looks like a bottoming formation. Rather than getting that Monday, we got a concerning reversal near key areas. The data says “inflection point”. It is difficult to make the claim the market is siding with the “big push higher” case given the shorter-term evidence we have in hand as of today’s close. To the contrary, the charts in their present form still say “be careful out there”.

Disclosure: I am/we are long SPY, VTI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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