Friday, September 30, 2016

SPX and NYA Updates: SPX Reverses from Target Zone

Last update was short, sweet, and to the point -- and anticipated that the S&P 500 (SPX) could rally to, then reverse from, the 2166-2172.50 zone.  SPX exceeded that target by 17/100ths of a point before dropping rather strongly.  Note the intraday gaps during yesterday's decline, suggesting that liquidity is currently thin.

Stepping back a bit to the hourly chart, it's interesting how frequently SPX has reacted to the red median channel line drawn on this chart on September 8:

From an intermediate perspective, I am continuing to treat this as the early stages of a downtrend, however to only consider one side of the trade is often a fool's errand, so I have included some caveats on the chart below.  We can see that bears do indeed have some work to do in order to solidify this "spec count."

Finally, the NYSE Composite Index (NYA) is, in my opinion, one of the best representations of the true broad market (as opposed to SPX, which only covers large cap stocks).  Here again, I have made some notes regarding the bull case:

In conclusion, I suggested shorting the market on September 8, and have not seen anything yet to convince me that the decline we've had since has ended yet.  As I've noted in several prior updates, this is hardly a "slam dunk" for bears, and there's certainly some ambiguity to this pattern -- but the pattern does still seem to give bears a slight edge for the time being.

On an unrelated note, long-time readers already know I believe that "news is noise" when it comes to the market, and that the charts tend to lead the news, not the other way around.  Thus, I feel compelled to comment regarding an article I recently read in a major publication, as follows:

Since I didn't watch the Presidential debate, I was skimming through a couple articles to find out how it went, when I came across this statement in an article that was published a couple days ago:

"Sensing that Clinton may have edged it, global markets traded higher."

That statement stands alone as the sole "market commentary" in the article.

I find this statement offensive, not in any emotional sense -- because I don't really care much about this election -- but in an intellectual sense. It bugs me because it insults the intelligence of the reader, and it plants bad seeds for those readers who do not understand equities markets. The entire statement amounts to nothing more than arrogant presumption -- yet that arrogance is cloaked and presented as a presupposition so indisputable that no further discussion is even needed. Meanwhile:

1. It presumes that the Presidential debates actually impact the equities market in the first place.
2. And not only the U.S. market, mind you: GLOBAL markets.
3. It presumes that Clinton won the debate.
4. It presumes that global markets could "sense" this victory.
5. And since they traded higher, it also presumes that global markets prefer Clinton.

That is an entire book's-worth of debatable assumptions -- yet they are casually dropped-in as indisputable facts via one little sentence. This is the type of crowd-impacting (and subtly brainwashing) bias that reporters throw in (consciously or otherwise) that just gets my goat as a thinking person.

I'd love to see how they explain the market's behavior today. I mean, we haven't had any more debates, have we? So the same logic must still apply: "After thinking a little harder about Clinton's debate victory, SPX gapped down several points on an intraday basis. Or maybe the debate and the market's little rally were totally unrelated to each other and are not a particularly good example of causation."

But I'm guessing that's not forthcoming as a retraction and correction. 

Trade safe.

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