Market Review Oct 18 2023 ( highest 10Y yield in 25 years, Broad based market decline, small, mid cap, and equal weighted perform worse than Cap-weighted index )
There’s zero reprieve from bond market, bond continue to sell off and 10-year yield continue to spike higher to a high of 4.92%, highest in 25 years, you will have to go back to 2007 to find a higher 10-year yield.
By Oct 18th market closing, There are several threatening development in market internals and bond market.
But first an overview of S&P 500 and US major indices.
S&P 500
Dicey chart : S&P 500 in triangle formation
SPX is still in inside a triangle formation, things could broke out either way. The list of things that can decide the next directional movement ?
1. Powell Speech on 19 Oct afternoon
2. 10-Year yield spike/retreat
3. Major market risk-on/risk-off mood ( Q3 earnings surprise/disappointment, upward/lower guidance, Crude oil spike above USD 100 per barrel )
4. Market movement for no reason whatsoever ( Exhaustion of buyers/seller, shift in flow of funds , when it happen Media will struggle or find an arbitrary reason to explain such directional movement )
Major US indices overview
Things I don’t like ( charts that suggest increase bearish odds )
Transportation, Mid&Small cap, equal-weighted index sell off
In just one day, sell-off in Transportation, Mid&Small cap, Equal-weighted SPX erased previous 2 session gains, performing worse than Large-cap Cap-weighted counter part. If it continue to sell off for the next several session, things would not look good. Broader breadth improvement and participation is crucial to a healthy & sustainable stock market.
Junk bond and 10-Year yield
10-year yield reach a high of 4.92% on October 18th 2023, and junk bond drop below previous week low. If Junk bond continue to sell off and stay below previous week session low for several days consecutively and S&P 500 might sell off again. If sell off happen, Could it break below early October low ? Possibly, hard to say at this juncture .
% of SPX stock above 50days and 200 days MA ( error and remove, to be corrected on next market review posting for Oct 19th post market closing
Apologies to readers, There’s an error in Stockcharts.com % of stock Above 50-day and 200Day MA, causing rendering of erroneous chart ( which i had posted , regretably )
It has since been removed, for latest corrected reading, pls refer to Market review Oct 19th 2023
80% Down day
Oct 18th 2023 is a 80% down volume day
The most recent 4 80% UP or DOWN volume day are as follows,
Oct 10 2023, 80% UP day
Oct 12 2023,80% DOWN day ( negate Oct 10 80% UP day somewhat )
Oct 16 2023, 80% UP day
Oct 18 2023,80% DOWN day ( negate Oct 16 80% UP day somewhat )
If we see more 80% DOWN day in the coming session, selloff could continue, but if we see more 80% UP day in the coming session, it would indicate the worse are over ( bottoms are in ).
The clustering of 80% DOWN/UP day could suggest a bottom, but as of now, we will have to give more weight to the latest signal of 80% DOWN day, which suggest sell off could continue for awhile more.
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.
In the next 2 articles,
1) Bond market explainer series part 2 – why the much-anticipated 2023 recession did not happen ?
2) US stock market review
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