We did not trade the October Seasonal this year, but I wanted to bring you up to date on the statistics for the trade now that the seasonal period has ended (it began with the close of trading on October 27th and ended with the close of November 2nd). This year, that was an $SPX gain of 108.88 points – the second largest point gain the 43-year history of the system. Percentage-wise, it was 2.4%, and that has been bested many times. Still, it was not a good trade to miss...
All of the major Indices have broken out to new all-time intraday and closing highs. This includes the "usual" $SPX, $DJX, and $NDX, but now they have been joined by the Russell 2000 ($RUT; IWM), although $RUT and $DJX did not join the party yesterday (November 4th). These charts are positive, and that dictates holding a long "core" position. There should be support at the breakout levels, which for $SPX is the 4525 - 4550 area.
Major Indices have broken out to new all-time highs. This includes $SPX, the Dow ($DJX), and NASDAQ ($NDX; QQQ) -- just barely for QQQ. The Russell 2000 ($RUT; IWM) is noticeably lagging. In any case, we use $SPX as "the market," and it is strong. This breakout has re-established a "bullish" rating for the $SPX chart.
During the last market decline (basically, during all of September and a little bit in October), $VIX just wasn’t too “worried” about the decline in stocks. Yes, one can see, from the chart of $VIX, that it had been slowly rising since the beginning of September, exactly in line with the downtrend in SPX which began at that same time. However, except for the one spike upward in mid-September, $VIX didn’t rise sharply. Perhaps if the decline in stocks had accelerated, $VIX would have responded better, but in reality, $VIX did not prove to be much of a hedge against losses in the stock market during this most recent stock market decline. This happens from time to time, the worst case probably being December 2018.
The rally that began with an upside gap move on October 14th has turned out to be very strong, and $SPX has now traded at and closed at a new all-time high. The Dow is very close to following suit, but NASDAQ and the Russell 2000 lag behind. More about that later.
There is still a chance that $SPX is merely at the top of a trading range that extends roughly from 4300 to current levels, at 4550. A clear breakout above 4560 or so would dispel that notion.
After opening lower on Monday, $SPX put on a strong rally, and closed near the highs of the day. Some of the internals did not follow as strongly, but for now the picture remains a more positive one. The downtrend line in $SPX has been broken, and the Index is pushing towards all-time highs at 4545. There are still a couple of gaps below current prices, and it would be a trend-changer if $SPX were to fill the lower one and close below 4372.