Poised for a Technical Rebound

Articles From: Briefing.com
Website: Briefing.com


Chief Market Analyst

It is a new week, which will eventually include a new month for the stock market. That seems like a welcome development considering the S&P 500 is down 5.6% so far in October, has traded below its 200-day moving average, and is now in a technical correction after last week’s losses pulled it more than 10% off its July closing high. The Nasdaq, down 4.4% in October, is also in a technical correction.

It’s not over yet, however. There are two more trading days to go in October. The hopeful news is that the first of those trading days is slated to start on a solidly higher note even though the 10-yr note yield is up five basis points to 4.90%.

Currently, the S&P 500 futures are up 24 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 95 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 196 points and are trading 0.6% above fair value.

This positive disposition has a lot to do with the negative disposition that has preceded it. Entering the “correction zone” has triggered some buy-the-weakness interest predicated on the speculation that the market is due for a bounce.

That speculation has ramped up a bit with the awareness that the Israel-Hamas War did not escalate into a wider regional conflict over the weekend. Israeli troops entered Gaza over the weekend, but the understanding at this point is that it is still a war between Israel and Hamas.

That understanding has helped deflate oil prices some. WTI crude futures are down 2.0% to $83.84 per barrel.

Other factors lending to the positive bias include the impressive earnings results from McDonald’s (MCD), the UAW and Stellantis (STLA) reaching a tentative agreement on a new labor contract, some M&A activity that has featured a $21 billion all-stock merger of equals between Healthpeak (PEAK) and Physicians Realty Trust (DOC), and positive price action in the mega-cap stocks.

The latter includes Apple (AAPL), which is up 0.3% and will report its earnings results after Thursday’s close. Apple, however, is trailing other mega-cap stocks in pre-market action as it is also contending with a Bloomberg report that suggests iPhone 15 sales may not be as strong as expected in China.

Apple highlights another huge week of earnings reporting that will include quarterly results from over 150 S&P 500 companies. But, wait, there’s more.

This week will also include policy decisions by the Bank of Japan (tonight), the Federal Reserve (Wednesday), and the Bank of England (Thursday), the Treasury’s Q4 borrowing estimates (today at 3:00 p.m. ET) and quarterly refunding announcement (Wednesday), the Consumer Confidence Index (Tuesday), the ISM Manufacturing PMI (Tuesday), the ISM Services PMI (Friday), and the October Employment Situation Report (Friday).

In other words, this is going to be a huge week of news that is going to create a lot of trading opportunities. The first opportunity comes today, and at the moment, participants look ready to take advantage of things from a technical standpoint.

Originally Posted October 30, 2023 – Poised for a technical rebound

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