The stock market closed out the week with decent losses and ended with most major indices losing approximately 2.5% for the 5 sessions.
The markets were apparently plagued by uncertainty surrounding potential developments in the Israel-Hamas conflict and ongoing interest rate
volatility.
Technically, the S&P 500 closed near KEY price, 50-day moving average, and trendline support, making the early action next week critical to determining the direction of the near-term trend. Most indices lost ground in the last 4 days after a positive start to the week and finished at the lows for the week going away!
The weekly decline left the S&P 500 below its 200-day moving average (4,233). At this point, the NDX +24% & the SPX +10% remain the only important indices still in the positive column for the year!
My main concern is that despite the approx, 8-9 % pullback we’ve seen since the highs in July, the major market indicators are nowhere near the intermediate oversold readings I am accustomed to seeing at important lows.
The McClellan Oscillator finished at its weekly low of -77. The most important market lows in the past usually were accompanied by readings BELOW -180-250, in fact, a few extreme instances saw steeply oversold readings below 1 -400!
Another concern is that the VIX volatility index, a gauge of investors’ fear in the markets, is still in the low 20s. Although it did pop from near 13 to just under 22 over the last 6 sessions, it’s still nowhere near levels we’ve seen at most important lows, in the 30-40 zone. That index has even spiked to levels above 80 a couple of times in the past 15 years. Intraday selling intensity, although steady, never reached the extreme intraday readings I’ve seen in the past.
Panic just hasn’t set in yet and a “Throw the baby out with the Bathwater mentality” hasn’t been experienced yet either. A deeper -1600-1700 TICK reading would certainly add to the oversold scenario and possible buy signal.
With some major market larger cap tech leaders like AAPL, NVDA & TSLA appearing dangerously toppy, it certainly appears that the next few hours or days will likely determine the trend for the next few weeks.
And remember, Trade what you see, not what you think!
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