• 99 days Could Crypto Overtake Traditional Investment?
  • 104 days Americans Still Quitting Jobs At Record Pace
  • 106 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 109 days Is The Dollar Too Strong?
  • 109 days Big Tech Disappoints Investors on Earnings Calls
  • 110 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 112 days China Is Quietly Trying To Distance Itself From Russia
  • 112 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 116 days Crypto Investors Won Big In 2021
  • 116 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 117 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 119 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 120 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 123 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 124 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 124 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 126 days Are NFTs About To Take Over Gaming?
  • 127 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 130 days What’s Causing Inflation In The United States?
  • 131 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Will Buyers Step Up Again?

Five Recent Misses

On September 30, we noted three examples of economic reports that came in below expectations. The disappointing theme also helped contribute to Wednesday's selloff in equities. From The Wall Street Journal:

Traders said weaker-than-expected economic data in Europe and the U.S. contributed to the negative tone Wednesday. Trading was busy, with 8.1 billion shares changing hands, the fifth-highest for any session this year... Stocks started the session lower and the declines accelerated during the day, after reports on U.S. manufacturing and construction spending fell short of economists' forecasts.


We Will Learn Something Soon

The chart below shows the S&P 500's 100-day moving average has attracted buyers during recent bouts of weakness in stocks (see A & B). The action of buyers near points A and B speaks to their economic confidence. Will the recent string of disappointing economic reports prevent buyers from stepping up this time? One way to see if their buying conviction is waning is by watching Wednesday's low in stocks. In the examples near A and B, the intraday low made near the 100-day held in the following sessions. We will see what happens over the next few days. The S&P 500 level to watch is 1941.

SPX Daily Chart


Market Warnings

Has the observable evidence been helpful recently? Yes, as noted in the September 22 tweet below, the market has been waving yellow flags for some time.

Ciovacco Tweet

A September 26 video also showed numerous concerns pointing to increasing odds of ongoing weakness in stocks.


Support Did Not Hold

On September 30, we showed the left version of the NYSE Composite Index below. The same chart as of October 1 (below right) shows buyers did not provide support for stocks as they had previously (see green and red arrows). Therefore, we reduced our equity exposure (SPY) and added to a now sizable stake in cash. If weakness continues, we may add to our more-conservative holdings before the end of the week. Our bond position (TLT) has gained 2.18% so far this week.

NYA Daily Charts


Investment Implications - The Weight Of The Evidence

Using the weight of the evidence involves taking numerous inputs into consideration. Therefore, it is not the end of the free world as we know it if the S&P 500 takes out Wednesday's low and fails to hold near its 100-day; it simply means the probability of further weakness will have increased a bit more.


Asia Weak

Around 7:30 pm ET Wednesday, the trend of economic/Fed concerns and equity weakness seemed to be ongoing. From Bloomberg:

Asian index futures slid with U.S. stocks as the yen and Treasuries rallied amid concern over weakness in the euro-area economy and the end of the Federal Reserve's stimulatory bond-buying program. Futures on Japan's Nikkei 225 Stock Average sank 1.4 percent in the Osaka pre-market.

 

Back to homepage

Leave a comment

Leave a comment