Technicals | Oct 25 2023
Bottom Line 24/10/23
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Neutral
Support Levels: 4300-4200 (zone) / 3808 / 3600 – 3400
Resistance Levels: 4638 / 4819 (all-time highs)
Technical Discussion
Reasons to revert to neutral:
→ Elliott Wave count potentially bullish bigger picture via our ongoing analyses yet the trend remains under pressure
→ still looking to see if 4200-4300 old resistance can 100% revert to support (watching immediate dip for confirmation)
→ interest rates and global political issues remain front and center
Whenever U.S. markets start getting somewhat wobbly we like to review the three main Indices a little more regularly. So tonight we are taking a look at the S&P-500, the tech-heavy Nasdaq Composite Index, and the smaller cap-focused Russel-2000 together in unison.
Interesting to note last night that the tearaway U.S. dollar fell against a basket of currencies, tracking a retreat in U.S. Treasury yields from the 5% level hit earlier in the session, and as traders await fresh U.S. economic data due later this week.
The US 10-year bond yield initially climbed above 5% for the first time since 2007 but then backtracked to close at 4.84%. We will take a closer look at the TNX again on Thursday as if we have the completion of a 5-wave move to the upside on this now or at least very soon, then a decent corrective move to the downside may be getting ready to trigger.
A move that could well prove to be a positive development medium term for U.S. markets. Too early to know for sure, although it is something we are going to be keeping a very close eye on over the coming months.
In our last review on Thursday we were a little concerned basis our preferred wave count, that the 5-wave move associated with the immediate wave-(c) had not completed yet. And this has now been confirmed with last night’s trading locking in a lower low with price tagging an intraday low at 4189 before closing at 4217 and back into our 4300-4200 support zone.
It was a see-sawing night with price heading strongly south to start, yet with buyers coming in quickly for a few hours before we experienced a weak close. Daily and weekly divergence indicators are now oversold yet there are no bullish divergences around on either.
So if we want to continue to remain longer-term bullish here we need a low to lock in sooner rather than later and for a Wave-2 low to confirm. Rather than something more bearish unfolding like a larger 5-wave pattern to the downside off the July 4607 high.
For now, we are sticking with this move south being (a)-(b)-(c) corrective in nature only and not something more bearish. Ideally, we would have liked to have seen the 4300-4200 support zone hold strong which has confluence to the 50.0% retracement zone, and this may still prove to be the case which will provide confidence.
Be it a move into the 61.8% pullback area and wave-(c) extension zone (see video) down toward 4100 would also be acceptable. Below here though and the Bears may well start to sink their claws into this, so it is essential that 4100 continues to hold strong from here.
Two and three sessions ago we also witnessed a small spike in volume on these weaker sessions which was not ideal, so the price/volume attributes are now a real focus for us over the next week or two. It’s pretty much make-or-break time now for the S&P-500!
Trading Strategy
Our aggressive, be it low-risk, trade on the long side at 4334 was stopped out Monday night at 4215.
In our last review as stated we were concerned that a lower low may still be on the cards and Monday night this is how things played out. So it’s time to stick to the sidelines until we can be more confident about what is going on here from a trend positioning perspective. We will know soon enough.
[The index closed up 30 points last night at 4247.]
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