Weekly market review Oct 30 – Nov 6 part 2 ( new charts and tools to assess new bull market )
Sorry to readers for posting this late. Because it takes time to develop new chart to have another lenses to examine the market. Previous reporting format and charts were developed to assess bullish/bearish evidence aiming at detecting turning point. As the turning point had already happen last week Oct 30-Nov 3, we need to look at some new charts to assess how far the rally can go and how many boxes it can check against some of my newly develop criteria in part 1 of my weekly market review entry. ( Which I will start from tomorrow daily market review report )
But fret not, many of the charts from previous reporting style are still relevant, especially market internals, breadth, Sector rotation, relative strength because these are ultimately what substantiate/negate price movement.
First an overview of S&P 500
Still think the Mid Sep Breakaway gap is a formidable resistance, does not expect it to be tested&exceeded immediately. Dips in the coming days are buyable. There are 2 retracement scenarios, ( both are equally likely )
Retracement Scenario 1:
Fibonacci retracement on the price swing from 4103 - 4373, buy zone around Fib 38.20% - 50%
Fib 38 % - 4270
Fib 50% - 4240 ( coincide with 200Day-MA )
Retracement scenario 2:
Price only test range low of previous congestion zone (Shaded blue box) around 4320 - 4380.
Range low also lines up with gap between 4320-4335, 2 trading days ago
Broad market overview
Equal-weighted indices, Mid&Small cap are underperforming Cap-weighted counterpart. Underlying weakness was masked by Megacap positive performance.
MOVE index
MOVE index close at 121.74 yesterday, would like to see it closing below 120 consistently and move closer to 100 in the coming days.
TNX (10Y yield)
10Year yield close at 4.66%, perfectly capable of retesting 4.7-4.8% range. Mid week 10Year treasury bond auction could be the focus of market attention and may decide near term movement. All in all, we would like to see 10Y yield move and stay below 4.5% consistently for stock market to continue rally.
DXY (dollar index)
Closed at 105 level, perfectly capable of retesting 105.50. Would like to see it close below 200day-MA 103 level
NYSE AD ratio and volume statistics
Thursday Nov 2, 7.87 to 1 NYSE Advancer vs Decliner ratio (2583/328)
89% UP volume day ( 936360922/1042924461)
Friday Nov 3, 4.97 to 1 NYSE Advancer vs Decliner ratio (2416/486)
81% UP volume day (828452107/1021116025)
Monday Nov 6, 2.58 to 1 NYSE Decliner to advancer ratio (2077/800), nothing too concerning.
% of SPX stock above 50days and 200 days MA
breadth is improving,
percentage of SPX-Stock above 50days-MA, recover from Oct-27 low of 10.6 to 46.6% .
percentage of SPX-Stock above 200days-MA, recover from Oct-27 low of 24.6 to 41.8% .
Sector performance on 1 week basis
Offensive sector ( Technologies, Communications , Consumer discretionary) outperform Defensive sector (Utilities, consumer staples) from Oct 31 – Nov 6, but the top-ranking Real estate sector is an eye sore.
Transportation
Transport sector is closely watched because it is an important signal in Dow Theory to confirm the rise/fall in DJIA / XLI index and over health of industrial sector. Wil be watching when the price can recapture 200day-MA and previous swing high at 15250
For market rally to be sustainable, the broader market need to step up as well, so we will look at industrials and financials today.
Industrials
V shape recovery is ongoing, and will monitor when it can close above 200Day-MA and how long it can stay above it.
Financials
V shape recovery has propelled it to close above 200day-MA for 2 days in a row. The longer it stays above, the better it is.
New Model: 63Day-MA Bollinger band
I have developed a new model, Bollinger band 63day-MA + 2standard deviation band.
Rationale for this model,
- Institution made major rebalancing/positioning every quarter ( 1 quarter = 3 months = 62-65 trading days )
- Visually it delineates the price directional swing & phases in bull/bear market relatively well.
- 2 standard deviation band contain overshooting price impulse movement
- Perform generally well on recovery phases after occurrence of bull/bear market.
- Not a precise timing tool, but good enough for weight of the evidence approach in assessing market situation.
2018 Volmageddon incident
-Crisscross 63Day-MA in the initial falling stages
-cross above and retest 63day-MA subsequently to recover
2018 “Tradewar” bear market
-Fell below 63Day-MA in the initial stages
-several failed attempt to recapture 63 days MA , and had a Waterfall decline subsequently
-market close above 63day-MA to resume V-shape recovery.
2020 Pandemic crisis
- breakaway gap and Fell below 63day MA
- initial recovery stage had a 63day-MA inflection point , was resolved bullishly subsequently for further rally
2022 Bear market
-Market fell and retest 63Day-MA
-retest 63day MA and standard deviation band subsequently after bouncing from 2022 October low.
2023 Aug – Oct 10Y Yield spike incident
-Market fell and had an inflection point around 63-Day MA, and broke down subsequently.
- Current recovery stage barely 1 close around/slightly higher than 63Day-MA
This 63Day-MA Bollinger band model demarcate price swing, inflection point, Up/Downtrend phases equally well for Nasdaq 100. NDX closed above 63Day-MA for 2 consecutive days with comfortable margin.
As always, we will continue to monitor various charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions.
Disclaimer : The information presented here are for research and education purpose only, and does not constitute investment advice, trading recommendation, author shall not liable for any action taken by any individual/company with regards to the information presented here or any part of the website - https://marketcycleedge.substack.com/