From the archives: First edition of The Stock Trader’s Almanac, with a note from my dad.
“Perhaps it’s Talmudic wisdom but, selling stocks before the eight-day span of the high holidays has avoided many declines, especially during uncertain times.”
— Jeff Hirsch, The Stock Trader’s Almanac
We shall see if last week’s sharp decline is completely retraced, or if Thursday-Friday’s strong rebound is rebuffed, heading into Yom Kippur.
The important thing to remember with such indicators is, as Richard Russell would say, “It’s the little exceptions that get you.”
As you can see on my candlestick chart below, Wednesday’s gap down negative black candle line left all of September’s price action as an island reversal pattern.
Chart by Steven Sarnoff h/t stockcharts.com
This price picture implies the likelihood, but not the certainty of a trend change. The key going forward will be to see how the venerable index behaves on a rebound attempt to fill the gap. The aged bull market may be tired and we are in a distinct time period of risk.
I see overhead resistance (supply) waiting at $291.50-$295.49, basis the close.
Underlying support (demand) from today’s positive session is at $284.82-$289.12.
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Pre-strike overview of Saudi oil field h/t US government/Digital Globe via AP
“Although drone attacks damage refineries they strengthen walls of worry.”
— Walter Deemer, @WalterDeemer
Grizzly Bear snacking on berries, h/t Drew Rush / NatGeo
After an early bounce, tired bulls are on the back foot. Hungry bears are selling. When asked why the market moved up or down on a given day, my dad would answer in his Brooklynese, “Sometimes the bulls gotta get fed and sometimes the bears gotta get fed.”
“Point drops in any index, be it the DJIA or the S&P 500, are meaningless. All these ‘3rd largest (point) drop in history’ stories are meant to mislead and scare you. Don’t let them. The only thing that matters is by what percentage did an index or stock decline or advance.”
— Jim O’Shaughnessy, @jposhaughnessy
h/t SentimenTrader, @sentimentrader
“Nothing like price to change sentiment.”
— Helene Meisler, @hmeisler
Measures of investor anxiety/fear and complacency/greed can provide valuable information in your analysis of the current market condition. View them as a technical tool to add to your weighing of evidence.
The chart above shows pre-market fear reaching levels seen at bottoms in 2002 and 2008.
This morning, Wall Street bulls are set to try for a market bounce before they bounce out to the Hamptons for their annual holiday weekend.
A week ago, I posted my Analysis and Outlook for the S&P 500 (SPY). The venerable index was rallying off its Christmastime low and I was anticipating where and when the balance of power was likely to shift. At the time, I was on lookout for a turn. That watch is now heightened. Here’s my update.
As you can see on my daily candlestick chart below, SPY is reaching technical resistance. Bulls could be slowing their roll.
Owls on the lookout, h/t NatGeo
This morning, SPY (S&P 500 ETF) continues its rebound on light trading volume. Buyers are following through from Friday’s strength, extending their immediate-term edge. But until proven otherwise by price, this may be considered a countertrend rally. Sellers are laying in wait.
Volume indicates the force behind a price move. Low volume questions the staying power of this action. Where can we expect sellers to be enticed?
Photo by Teresa Wood, Brian Dykstra as King John, h/t broadwayworld.com
by Steven Sarnoff
As the stock market’s decline intensifies, one wonders what central bankers will do. Will they coordinate to take down the US dollar? Their objective would be to boost their balance sheets and pump out enough liquidity to prop up ailing share prices.
Will Treasury Secretary
Munchkin Mnuchin again call the PTT (Plunge Protection Team)? Stocks are sliding hard. It will likely take a sizeable sovereign effort to turn the state of the market.
by Steven Sarnoff
Note: The chart within is updated from my original article, which appeared November 21st on other media platforms.
When I was young my father would enjoy telling me a fable, “The Scorpion and The Frog.” With Financial Talking Heads debating whether stocks are still in a bull market or now a bear, I hearken back to that tale.