Daily market review Nov 29th, 2023 (Consolidation/pullback likely in the near term)
Broad market overview
Market is displaying “toppish” pattern across the board, with many pin bar and bearish engulfing pattern ( open/gap up higher but close lower ). Seems to me that consolidation /pull back is likely in the near term.
How far will we pull back if it happens? will assess again in the weekly market review.
Bottom line, this is still a re-initiation of a strong bull market ( Oct 2022 – Jul 2023, Nov 2023 - ??? ). Shorting is rule out completely, even for the shortest term trading. I will only look to enter long again after some consolidation/pullback.
SPX
Market form an ascending triangle going back to Pandemic Low, and Dec 2021 high. So long term it’s still bullish, but market is unlikely to power through and breakout to further new high immediately. So 2 scenarios going forward,
Scenario 1 Pull back before breaking out (80% chance)
Scenario 2 Breakout and retest subsequently the downtrend line connecting market peaks of December 2021 and July 2022. (20% chance )
NDX
Price stop again at 161.8% retracement fib level of Market October down swing. This fib level is becoming more relevant by the day.
Bollinger band 63Day-MA + 2SD
Rationale for this model are explained in previous blog entry (Weekly market review Oct 31 - Nov 3 part 2) if new readers would like to know more.
There are very limited room before SPX touching the 2 standard deviation upper Bollinger band.
For NDX, 2SD upper Bollinger band is blocking further advance
Probability of retracing for both SPX and NDX exist and likely materialize in the near term.
MOVE index
MOVE index closed at around 114.6, may go up to 120 level if 10Y yield retest 4.5 – 4.6 level, index will likely fall if it happens. In the mid – long term, would like to see it moving closer to 100 in the coming month. ( Lower MOVE index decrease bond haircut, causing an increase in collateral value of bond, leading to more fund available for big institutions, thereby increasing market liquidity. )
NYSE market internals
Monday Nov 27, 1.37 to 1 NYSE Decliner to Advancer ratio ( 1654/1202 )
Tuesday Nov 28, 1.03 to 1 NYSE Advancer to Decliner ratio ( 1437/1393 )
Wednesday Nov 29, 1.91 to 1 NYSE Advancer to Decliner ratio ( 1887/987 )
Sector performance on 1 week basis
On 1 week basis, 2 offensive sector (Technologies, Consumer discretionary) are ahead of Defensive sectors ( Consumer staples and utilities ). Seems ok to me at the moment.
Charts that suggest possibilities of imminent pull back
10Year Yield (TNX)
10Y yield close lower at 4.27%, near support level but SPX fail to close higher, high chance of SPX pulling back in the near term
Junk bond gap higher but close lower, shooting star candlestick, indicating imminent pullback for junk bond as well.
% of SPX stock above 50days MA
Market breadth is very solid ( but getting nearer to too solid for % of stock above 50days MA)
percentage of SPX-Stock above 200days-MA, currently at 59.6% .
percentage of SPX-Stock above 50days-MA, currently at 76.6% . market has pulled back from 70%++ in the past, otherwise market likely will run up to 80% or even 90% before consolidation/pulling back sets in.
NYSE McClellan Oscillator
SPX made a higher high, but NYSE & Nasdaq McClellan Oscillator is making lower high, potential divergence in development, signalling that breadth is less good underneath the surface. We will observe a few more days for the pull back occurrence
Bottom line
Short term : pullback likely due
Mid term : bullish
Long term : bullish
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions.
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