It is time for our weekly review of what actually happened in the market during the week of October 29th.
In our last week blog update, we wrote that the $SPX, weekly chart could find a support around 1,397.37. This week price tested this area. However, although the selling volume was increasing as it approached this area, it did not break it, setting it up for a potential bounce for the week (see white arrow where price bounced and yellow arrow where selling volume bar is located).
If price decides to break this support area, the next support level remains the THD MA (*), which now stands at the 1,328.50 area (see white line under white arrow).
The monthly bar is just beginning to form (we are only 4 days into November) and have until the end of the month for the bar to close. While there is a possibility for a further pullback, we need to pay close attention to what the weekly chart does first. Remember this is election week and there are many economic reports coming out so we will have a very volatile week for sure!
On the $INDU, the weekly chart, price tested the prior support area and bounced. Again as it did with the $SPX, it did so on an increase in selling volume. If price decides to break the supporting area, price may continue down to the THD MA (*), which is now located at 12,561.47 (see white arrow where price bounced and red arrow for the volume bar). On the other hand, the monthly chart is still forming and it is too soon to say what will develop. We need to pay close attention to the weekly and also the daily chart for market direction.
Last week the $COMPX (NASDAQ), continued moving downwards with a slight divergence on the low (and it did not break the prior low). Price also made a potential lower high (white arrow) with a volume bar that indicates buyers were not interested. However, we had a historical two day closure of the markets last week, which could also affect the weekly volume (3 days versus the typical 5 day trading week). For the month, which is just beginning, the red volume thus far (check the red bar on the monthly chart under the yellow arrow) accompanied with the blue dot on the RSI (under the white arrow) may be signs that, at the moment, the market does not have any intent to move higher.
If you study the charts above you can see that price is range bound for the most part between their respective pivot highs and lows.
Anyone beginning a position must take a signal from smaller time frame (daily minimum) supported with volume in the direction of the overall trend.
Again, we encourage all of you that are option and stock traders to use this methodology to gauge market direction. Any position that you make must be supported by the overall market and you must manage accordingly.
See you next week as I will post the weekly and monthly outlook for the markets.
(*) These are THD indicators. If you want to know more about these tools please visit the THD website for more information.