Just when it looked as if the market was going to do what was widely expected of it in October, keep climbing, the market decided to remind everyone that it can go down from time to time.
Thus far, the high flying technology stocks have been hit the hardest with NASDAQ (NYSEARCA:QQQ) dropping nearly 400 points over the last seven trading sessions. NASDAQ (chart above) has dropped through projected monthly support (green dashed line) and its 50-day moving average (solid magenta line). NASDAQ’s 200-day moving average (solid red line) is nearly 250 lower just below 7500. NASDAQ has not traded below its 200-day moving average since July 2016. Stochastic and relative strength indicators applied to NASDAQ are near oversold, but MACD has yet to sink to an extreme level.
S&P 500(NYSEARCA:SPY) and DJIA (NYSEARCA:DIA)have also retreated. S&P 500 is currently trading right around its projected monthly support level (green dashed line) and its 50-day moving average (solid magenta line). S&P 500’s pullback has been milder than NASDAQ and its Stochastic, relative strength and MACD indicators are not as deeply negative. If it can hold current levels then higher would be the most likely direction. If current support fails and S&P 500 continues to head lower, its 200-day moving average at 2765 could be in play.
Thus far DJIA has held up the best. It most recently traded at a new all-time and has sold off the least. Its technical indicators are confirming recent weakness, but are not signaling oversold. DJIA is also modestly above its projected monthly support level (green dashed line) and its 50-day moving average (solid magenta line). Provided economic data remains firm, the Fed doesn’t get overly hawkish and bonds yields don’t move much higher any quicker, the current pullback will likely end up being a buying opportunity ahead of the historically “Best Months” for the market, November through April and the Sweet Spot of the four-year-presidential cycle.