Stocks did an abrupt about face this week and have rallied strongly every day. At first, this rally was propelled by some strong oversold conditions and the fact that $SPX had bounced off its lower downtrend line. But as the week wore on, reports from the FOMC meeting and the Unemployment statistics emboldened investors who care about such things. This was all taking place during what is arguably the strongest seasonal pattern of the year.
The October Seasonal trade will take place this year. It is a very simple trade: buy “the market” at the close of trading on October 27th, and sell out your position on the close of trading on November 2nd. There are adjustments for weekends, but neither of those dates falls on a weekend this year.
Join Larry McMillan as he discusses the current state of the stock market on October 23, 2023.
Stocks continue to fall, as the downtrend that began at the end of July persists (red lines on the chart in Figure 1). New relative lows were made again this week, so the pattern of lower highs and lower lows is evident. That defines a downtrend, and it also warrants holding a "core" bearish position.
The $SPX Index broke down through 4330 a week ago (Friday, September 22nd), tried to rally back above it for one more day and then gave way to a sharp selloff. Thus, 4330 was not only a crucial support level that has now been broken, but it is also going to serve as resistance. There are a number of things going on right now in the market, but as you can see, there is now a downtrend (red lines in Figure 1) -- lower lows and lower highs. That is a full-fledged bearish trend, not just minor correction.
The week after September expiration (i.e., the week after the third Friday of September) is historically a very negative week for the market. In fact, last year, that week saw a 180 point decline in $SPX, the largest point decline that we have seen in the 33 years that we have been using this indicator. It was not the largest percentage drop in a week for this system (that occurred in 2011).
Join Larry McMillan as he discusses the current state of the stock market on August 21, 2023.
Join Larry McMillan as he discusses the current state of the stock market on August 7, 2023.
We have been talking about the possibility of this buy signal occurring, and now it has. That is, the running total of advancing volume minus declining volume, daily (in “stocks only” terms), has reached a new all-time high – exceeding that of December 2021. When CVB reaches a new all-time high, $SPX follows.
