On Alert for a Big Pull Back in US Stocks

On Alert for a Big Pull Back in US Stocks

On Alert for a Big Pull Back in US Stocks

$DIA, SPY, $QQQ, $VXX

The recent declines and volatility may be the signal for the beginning of a roll over pullback in US stocks

OHSBC Holdings Plc technical analyst Murray Gunn. In a new note says he is now on alert for a big dip in US equities.

“With the U.S. stock market selling off aggressively on October 11, we now issue a Red Alert,” he writes. “The possibility of a severe fall in the stock market is now very high,” he adds, noting that volatility has continued to rise since the end of the Summer and the recent sell-off was seen across many areas of the market, and not just select groups.

Also causing some concern for Mr. Gunn is the intensity of the selling pressure, measured by what we know as the Traders Index, an indicator that combines both market breadth and the trading volume of advancing stocks versus declining stocks.

The higher the index, the more Bearish that day’s trading action.

Earlier this week, Ben Laidler, global equity strategist at HSBC Holdings Plc said in an interview that the stock market is exposed to “a dangerous combination” of risk factors that investors are not looking at closely enough. Reasons for his caution included high earnings expectations, economic-policy uncertainty as well as the upcoming US election and the Italian referendum. “We think markets are pretty vulnerable,” he concluded.

Other firms have issued similar warnings, with Citigroup Inc. Head FX Strategist Steven Englander telling clients that investors aren’t adequately hedging US election risk and technical analysts at UBS AG calling for a top in the S&P 500 following the recent bond market sell-off that pushed yields on the benchmark 10-year US Treasury above 1.7%.

The Key marks that I am watching are 17,992 in the DJIA and 2,116 in the S&P 500.

As long as those marks hold, the Bulls still have hope. But should those marks break and the markets close below, it will be a clear sign that the Bears have taken over and are starting to dine.

Thursday, the US major stock market indexes finished at: DJIA -45.26 at 18098.94, NAS Comp -25.69 at 5213.33, S&P 500 -6.63 at 2132.54

Volume: Trade was moderate and below average with 879-M/shares exchanged on the NYSE

  • Russell 2000 +7.2% YTD
  • S&P 500 +4.3% YTD
  • NAS Comp +4.1% YTD
  • DJIA +3.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bearish (-0.28) Bearish (-0.27) Bearish (-0.42) Neutral (-0.14)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (-0.19) Neutral (-0.14) Bearish (-0.29) Neutral (-0.14)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.18) Neutral (0.05) Neutral (0.12) Bullish (0.38)
HeffX-LTM Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.06) Neutral (0.03) Neutral (0.08) Bearish (-0.29)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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