EB Daily Market Report - Quick Update - Friday, October 13, 2023
I had an opportunity to quickly look at the stock market today and wanted to pass along just a few quick points.
Negative Divergences - Hourly Charts
I had mentioned in yesterday's DMR that we were battling negative divergences on the S&P 500 and NASDAQ hourly charts. Today's drop completely squared away those momentum issues. We've now seen 50-hour SMA tests and PPO centerline tests on both indices. Here's a quick look at that S&P 500 hourly chart:
Just like the prior two negative divergences, this one resolved itself today in similar fashion - by testing the 50-hour SMA and PPO centerline. Short-term momentum is no longer a problem for the bulls.
Commodities Soaring
Gold ($GOLD or GLD) is having a huge day. It's up more than 3% and appears to be breaking its 2023 downtrend line. Also, it's now testing a key relative resistance level. Check this out:
Most of you know that I'm not a fan of gold, mostly because it's been a relative underperformer. If it can break out here on a relative basis, perhaps it'll be a solid short-term trade. Still, I'm avoiding it for now.
Other commodities are very strong today as well. Silver ($SILVER, +4.29%) and crude oil ($WTIC, +5.56%) has surged back above $87 per barrel.
Volatility Index ($VIX)
We're seeing yet another resistance test at that key 20 level. A breakout on a closing basis would certainly point to the increased probability of a potentially damaging market decline ahead. However, failing at this 20 level and ultimately trending back down towards 15 or lower would likely accompany a significant rise in U.S. equities. So there's definitely a battle taking place between the bulls and the bears right now. For a refresher, here's today's failure at 20:
All of these arrows point out that when the VIX tops at 20, it's time to buy the S&P 500. Of course, the million-dollar question is......will the VIX stop at 20 this time? Let's keep watching.
I'll spend some more time sorting through all the charts and assess any technical damage and get back to you in this weekend's Weekly Market Report. For now, though, I'd view this as nothing more than a short-term setback for the bulls, barring a final HUGE 15-20 minute selloff.
Happy trading!
Tom