Last quote by Katie Stockton
Katie Stockton quotes
It's the first time that we're seeing some signs of exhaustion.
An important point about the signals that we've seen just over the past week is that they've really been concentrated in the financial sector.
Short-term overbought conditions are being absorbed via a consolidation phase this week. December's positive seasonal influences should help preserve the momentum behind the market, allowing for positive follow-through into year-end.
The SPX confirmed a breakout yesterday that yields a short-term measured move price projection of 2285. The breakout is supported by positive short-term momentum, and overbought conditions have yet to create a drag on the market.
Momentum is proving strong enough to overrule overbought conditions, so we think it is appropriate to be buying breakouts.
Signs of short-term exhaustion have arisen in macro-level indices representing stocks, bonds, commodities, and currencies. This tells us to expect a pause in their steep upmoves/downmoves in the next 1-2 weeks as overbought/oversold conditions are absorbed.
A pullback unfolded last week, leading to a successful test of initial support near 2115 by the SPX. Short-term momentum has weakened, but oversold conditions are widespread enough to suggest that the pullback will mature this week.
For me, it could be the return of overbought conditions on Friday. We had a pretty strong session on Friday and that supports a pullback today.
It's a minor level because it hasn't been tested that much. Technical levels are stronger the more you test them.
Yesterday's pullback did not damage the chart of the SPX, which still has the support of improved short-term momentum. European markets look like they may be undergoing a shakeout (of weak holders) characterized by strong emotions and heavy volume.
Our short-term indicators continue to support the pullback, with room for volatility to expand. Fortunately, breadth has gotten oversold enough to suggest a breach of support would be short-lived. We would be seeking buy-the-dip candidates to add exposure to once short-term momentum improves.
Seasonally, you'd expect further downside.
I think investors might be rewarded by waiting a few days, but not much longer than that, based on indicators.
Now there's minor resistance at the high, 2,194.
Yesterday's rebound did not improve the posture of our short-term indicators, which remain supportive of the pullback. The SPX has confirmed a breakdown below its 50-day moving average in a reflection of weak short-term momentum.
More climactic selling is needed to bring our market internal measures to oversold extremes, therein signaling a tradable low.
I think short-term underperformance is to be expected from biotech stocks, and other high-beta areas of the market, as the major indices pull back. However, I expect them to exhibit leadership in Q4.
Tested twice, three times, makes it more obvious to be a strong resistance level. There's pent-up selling pressure there.
An oversold bounce is likely to interrupt the pullback in the SPX today, but we think it will fade on weak short-term momentum. Signs of short-term downside exhaustion have arisen in the technology sector and European equity benchmarks, supporting a few days of stabilization in those areas. However, broad-based indices like the SPX are still a couple of days away from flashing short-term oversold 'buy' signals.
Yesterday's 1.0 percent decline in the SPX reflects a loss of short-term momentum that was already evident in most global equity markets. We find it worrisome that the NASDAQ 100 Index gapped down for the first time since early January.
U.S. stocks are positioned to pull back this morning on the back of weakness in Europe. Initial intraday support is about 20 points below current levels for the S&P futures, heightening downside risk for today/tomorrow.
The relief rally is persistent and reflects improved intermediate-term momentum. However, we would be wary of a loss of short-term momentum given widespread short-term overbought conditions.
The SPX cleared short-term resistance last week, but we expect upside follow-through to be limited by short-term overbought conditions.