Commentary: Paul Ebeling on Wall Street

Commentary: Paul Ebeling on Wall Street

$DIA, $SPY, $QQQ, $RUTX, $VXX

What the market technical are Flashing

The most watched support mark is the 200-Day SMA. Look at any chart, and you will see the S&P 500 Index criss-crossed the 200-Day SMA in 7 of the past 10 trading sessions

A more effective support mark is the trend channel and 50-Week SMA shown below, hardly anyone watches this indicator.

The Green arrows show how often the 50-Week SMA has acted as support in recent years.

Last week, when the S&P 500 bounced from it, the 50-Week SMA coincided with the Black trend channel, which increased its predictive potency. Once that was broken, investors and traders acted to preserve gains.

Next support for the SPY is around 2,640, 2,600 and 2,590.

Support marks for the Russell 2000 Index-1.10% NAS Comp,  and DJIA  are also not far below current trade.

 

The Bulls Vs The Bears

Sentiment Indicators

As the chart below shows, we are seeing a number of short-term sentiment extremes.

• VIX: Although the VIX (VXX), -0.25%  can move higher, readings around 25 have marked prior lows.

• VIX/VIX3M ratio: The current reading of 1.15 means that investors are more concerned about 30-day volatility (VIX) than 90-day volatility (VIX3M). This usually occurs near a low.

• CBOE equity (PCR) put/call ratio: Currently at 0.71, which means that traders are buying 0.71 puts for each call option. While this is elevated, readings around 0.90 are more commonly seen at lows.

• VIX Contango: Currently at 4.85%. That means that VIX futures trade 4.85% above the spot price. This is elevated, but could still move higher.

The S&P 500 has met and exceeded the initial Wave c Southside target at 2,675. A number of sentiment gauges are at or near “bottom is in” territory.

Another leg lower to flush out the ”weak hands” is still possible, but outlook suggests that another drop, if it will be followed by a sizable rally.

 

Support and Resistance

HeffX-LTN’s US Major Stock Market Indexes Technical Analysis for the Week Ended 26 October 2018

Date Symbol Price Technical Analysis Support Resistance
26 October 2018 QQQ 166.66 Bearish (-0.31) Nil 166.90
26 October 2018 DIA 246.53 Bearish (-0.28) 243.45 250.28
26 October 2018 SPY 265.33 Bearish (-0.48)  264.00 269.21

Have a terrific week

 

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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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