Commentary: Paul Ebeling on Wall Street, October Looms

Commentary: Paul Ebeling on Wall Street, October Looms

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$DIA $SPY $QQQ $RUTX $VXX

Last Week in Review

Despite the seesaw action in the long term it is constructive. Volatility is flat, and the P/C ratio recently hit 1.0 on an Northside session. Those are positive divergences.

Technical Analysis

NAS Comp: Thursday, the index tested to 10,500 pts on the low. Then, it moved up off of that mark to close. The volume was as strong as it was during Wednesday’s selling. It held its support and found bids again at that support. The NAS is continuing to show some new buying interest in big tech stocks when they move lower aka buying the dips.

S&P 500:  The S&P 500 sold to a lower selloff low and bounced higher Thursday. And closed over the 61% Fibo retracement mark of the June to September move. See it setting a D point on an ABCD consolidation off of the September high. The reversal has not been confirmed, but my work shows that it will be soon.

October Looms

October is the historically most volatile month of the year for the US stock market, if you are prepared there’s nothing to fear, as the market typically rises in October and combined with the volatility, gives investors 1 of the best opps for getting into stocks of the entire year.

So it’s important to review October’s history so that you do not get scared out of the market.

The chart below, which plots the standard deviation of each month’s daily changes in the DJIA since Y 1896. October’s is 1.43%, far higher than the all-month average of 1.09%.

You may wonder if October’s volatility can be traced to the month coming immediately prior to elections both Presidential and mid-terms.

The Big A is No.

The stock market in October is more volatile than in any other month even if we focus only on the 1st and 3rd years of the Presidential cycle.

The Stock Trader’s Almanac refers to October as the jinx month. I see it as the opp month as the combination of October’s volatility and average gain can work to the alert investors and traders benefit.

Measuring the DJIA’s gain from its lowest closing price during the month to its highest close over the subsequent 2 months, and on average since the late 1800’s, October’s potential when measured this way is higher than for any other month of the year.

So, be prepared for an increase in stock market volatility in coming wks. And unless you have other reasons to get out of stocks, you should ride out the volatility and not go to cash.

Remember, always take what the market gives, and it is your money and therefore your responsibility.

Have a healthy week, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.