Commentary: On (Update)

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Update: This week on Wall Street got off to a poor start for all of the US major market , which saw steady selling pressure from the opening bell in a trend-down day.

Key psych support were cracked and broken Monday.

DJIA -312.78 at 16001.89, NAS 100 -142.53 at 4543.96, S&P 500 -49.57 at 1881.78

Stock market pain could continue well into October.

Participants sought Southside protection, seen by the 17% spike in the Volatility Index () 27.58, +3.96, and generally stayed away from buying much of anything, “buy the dips” is no longer the theme.

The growth concerns were fueled Monday by a report showing industrial profits in China declined 8.8% Y-Y in August Vs a 2.9% decline in July, another drop in commodity prices, and head Christine Lagarde said that the ’s forecasts for 3.3% global growth this year and 3.8% next year are no longer realistic.

for DIA:  Overall Short Intermediate Long
Bearish (-0.34) Bearish (-0.36) Bearish (-0.44) Neutral (-0.22)
Analysis for SPY: Overall Short Intermediate Long
Very Bearish (-0.55) Very Bearish (-0.54) Very Bearish (-0.56) Very Bearish (-0.53)
Analysis for QQQ:  Overall Short Intermediate Long
Bearish (-0.29) Bearish (-0.27) Bearish (-0.35) Bearish (-0.25)

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Friday, after breaking lower from the wedge and selling 5 of past 6 days the US major market indexes were set to bounce and test the move. And they did, for the 1st hour to mid-day. Then sellers took over and ran many stocks South, mostly on NAS 100.

Still, the action left the S&P 500 and DJIA with some near term Northside bias. The NAS 100’s reversal was not good, as it is looking for the early September low.

The Big Q: Is a near term bounce to test the break below the trendline in the upward pointing wedge happening, or will we see a continuation of the move to test the low?

The Big A: Overall, expect that we will see a test to the prior low and below.

In the near term

The volatility continues, and we see Northside moves inside the moves South. So, stay ready to play the overriding theme, and that means leaving the Southside plays running.

If Wall Street’s big names continue the action shown Friday, major market indexes are likely on their way to that deeper test. Those leadership stocks have held the Wall Street indexes higher, and when they break, so go the indexes.

With that in mind look for  more Southside plays to capture that move. Some more SPY, some more NAS 100, as  stocks have put in visible tops.

On the Northside, as the money rotates…

Utilities and personal products, precious metals, chips, and some software issues still look good.

The Wall Street participants’ sentiment and internals are at extremes, so stocks and the indexes are working on setting up their bases. Then after the selloff is over, when the low are tested, then look for Northside setups.

We saw pattern degradation last week and not many stocks look ready to move North this week. So, keep watching of improving  patterns. And if there are no good ones to lead North on a rebound, the rebound will fail, and we will see a leg down.

The importance of solid pattern analysis is clear.

Remember, there will always be another trade, and the name of this Wall Street game is to make money.

Have a terrific week.

Paul Ebeling

 

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