We have a crazy week ahead! Starting off with Monday’s Jewish holiday, Yom Kippur, then Tuesday's presidential debate, states John Person.
Thursday, we begin a new month and quarter, with holidays in Asia, Fed speakers throughout the week, and the monthly unemployment report out on Friday. Politics should be interesting as well with the POTUS pick for his third SCOTUS candidate.
For a few weeks now I have been stating: “If there is a next wave lower coming then we need to watch for an uptick in the volatility (VIX) and higher readings in the ten-day ATR, as well as signs of prices weakening with weekly close below monthly pivot levels. Then, if we see that occur, this market has more downside in the days and weeks ahead.”
The ten-day ATR in the E-mini S&P futures did uptick and remains elevated with a 73.28 reading. On August 31, it was at 34.6. The VIX rose 2.13% last week, but not significantly set off alarm bells just yet. Gold (GLD) fell 4.51%, bonds (TLT) gained .95%, only two sectors posted gains last week, one was consumer discretionary (XLY) for a modest .24% gain and the other was technology (XLK), which gained 2.18%. Amazon gained 4.75% and Apple gained 5.1%. The most disturbing decline was in the energy sector (XOP), which fell 10%. Then the steel sector (SLX) fell 6.71%, US Steel (X) fell nearly 20%. The financial sector (XLF) plunged 4.28%. Interesting times for sure with the most unprecedented weekly price moves.
- Let me put this in a different perspective, on how unprecedented the stock markets price swings are. From Thursday's first-hour low to Friday's close, a total of twelve (12) hours of actual trading time, the move in SPY was 3.06%. Roughly the entire yearly gains for that index.
Here are the year–to-date (YTD) & week-to-date (WTD) performance.
S&P 500 (SPY) up 3.60% / weekly: -.58%
NASDAQ 100 (QQQ): up 28.47% / weekly +1.96%.
Dow Jones Industrial Average (DIA): down -3.15% / weekly: -1.77%
Russell 2000 Small Cap Sector (IWM): down -10.77% / weekly: -4.26%
- Weekly Persons Pivots: The indicator outlook is bearish for SPY, QQQ, NYSE, IWM, & DIA.
- Monthly Persons Pivot: Support levels were tested; October’s outlook is anticipating a bearish trend!
- Seasonal Price Trends: Weak for the major averages through early October.
- Breadth analysis: Weekly readings are neutral. Daily readings rose suggesting market could bounce.
My take is the market is positioning itself ahead of a change in political leadership to some degree, also the Covid 19 trades (ZM, AMZN, NFLX,) and “FANG” names supported last week’s technology sector weighted move. But keep this in mind, most of the big names remain well off their yearly highs and remain in a weekly sell signal. All had positive bounces last week. Here are a few examples (CMG, AAPL, AMZN, PYPL, GOOGL, FB). There were a few exceptions that saw strong gains and are near their highs or making new highs on the year like Costco, FedEx, Square, ServiceNow, and Twitter.
For this week, my take is to expect another wave of volatility or short-term wild swings. Between the Jewish holiday Yom Kippur on Monday, the presidential debate on Tuesday, and political “current events” surrounding SCOTUS (might distract Congress from passing another stimulus bill) and the end-of-week Asian holiday, we could see rally in the major averages earlier in the week, and I would not be surprised to see another downside washout.
The S&P 500 only had four PPS technical bullish weekly buy signals versus 52 new weekly bearish PPS sell signals (14 alone in financial sector). If we generate new daily sell signals mid-week, this will present a short-term selling opportunity for the next week or two or better buying opportunities in mid-October. Quite frankly there are too many stocks in weekly sell modes to trust buying much right now. The bottom line is this, my technical work suggests sitting tight for now and waiting for true buy or sell signals to materialize. This is a purely a day/overnight short-term traders' dream market.
To learn more about John Person, please visit PersonsPlanet.com.
