What happened last week.
What we're watching for
next week.
Who's your favorite market pundit?
Dennis Gartman, editor of the Gartman Letter, told readers it was time to sell... finally. He might be right. But he also might be wrong. That's why I always recommend that my clients get a sample of both bulls and bears before they make a decision of this magnitude.
Chart 1. S&P periodic returns.
The periodic returns have improved somewhat from last week, but when you compare them to the readings from 5 weeks ago you can see that the market is still under considerable pressure. The rally of 2018 is petering out, and it's an open question whether the market can regain the high ground at 2,930 on the S&P.
This Week
5 Weeks Ago
Key Markers
The two charts below are confirmation of the weakness of this market. We flirted with the correction marker of down 10% last week, but we closed above that level. The support price I'm using is 2,581 which is the low price we reached during the last correction in January-February of this year.
We sit comfortably above that level for now, but as I said, in a fluid market like the one we're in right now, anything can happen.
Chart 2. Distance from Key Markers
This Week
5 Weeks Ago
Chart 3 - chart of the week
Let's agree that October was not a happy time to be in the market. But how bad was it? The chart below reveals the answer.
At its' worst, the market was down 9.9%, which doesn't even qualify as a correction. Today the market is down 5.1% from the last peak, which means we are in a "pullback." When we put things in a bigger context, we can see that this market event is nothing special.
Chart 4. The Market Dashboard
Is this week just a dead-cat bounce, or is it something more sustainable? A look at the market dashboard reveals some clues.
Even with today's (Friday, November 9th) market decline, the dashboard is gushing with positive readings. Drawdowns have been cut in half. Up days out of the last 21 days have recovered nicely. Vix spiked early on, but is now settling back down. The year-over-year change in the S&P 500 is close to breaking out above the 10% marker, which would be further evidence of a recovery.
The 50-day moving average of market prices is still above the 200-day line, which is also a bullish sign. And the Bollinger Bands are settling down after spiking to a 12 month high last week.
Final Thoughts
We have now had two back-to-back positive weeks in the market. Is this rebound sustainable? I don't know. But I'm telling clients to be prepared for more downside. It's the prudent thing to do.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org