KEY
TAKEAWAYS
- The S&P 500 is nearing trendline help, which might present an important sign of draw back rotation.
- Market breadth indicators are starting to diverge from the index, trending decrease within the month of October.
- The MarketCarpet visualization exhibits a regarding drop within the mega-cap progress names which dominate our benchmarks.
As we get into the meat of Q3 earnings season, I am seeing a rising and regarding variety of indicators of distribution within the fairness markets. From lagging breadth indicators to deterioration of pattern for the market leaders, we may very well be getting into a painful interval for threat property! Let’s undergo three totally different lenses by way of which we will make sense of the market setting in October 2024.
The S&P 500 is Holding Up (For Now)
My day by day S&P 500 chart exhibits how 2024 has regarded and felt an amazing deal like 2021 or 2017, with a gradual and regular uptrend and minimal drawdowns.
On this type of setting, I am going with the “line within the sand” method, the place I determine a key stage or sign that will inform me the uptrend part could also be ending. A easy trendline utilizing the August and September lows has offered a transparent line within the sand going into October, and, so long as the S&P 500 stays above this trendline help, then the uptrend stays intact.
However as we have been monitoring on my day by day market recap present, CHART THIS with David Keller, CMT, the benchmark has been getting dangerously near this trendline help in mid-October. So, whereas the 2024 uptrend stays intact, the tip of the pattern could also be pretty shut.
Breadth Indicators Exhibiting a Bearish Divergence
What different approaches may also help us anticipate when the tip of the pattern is close to? Right here, I am displaying the S&P 500 on a closing foundation, together with two breadth indicators I assessment each single day.
The second panel consists of the % of S&P 500 members above their 50-day transferring common, and the underside panel shows the S&P 500 Bullish % Index. Discover how each of those breadth indicators have been sloping downwards within the month of October, whereas the S&P 500 has been trending greater?
This bearish divergence between the key averages and key breadth indicators tells me that, whereas many shares nonetheless stay in major uptrends, increasingly are experiencing a worth drop to the diploma that they’re both breaking beneath the 50-day transferring common or producing a promote sign on their level & determine chart, or each!
MarketCarpet Speaks to Weak spot in Mega-Cap Development
As soon as I’ve a normal sense of a broad market theme, I like to make use of the StockCharts MarketCarpet software to raised visualize how the varied index members are transferring in relation to the pattern within the benchmarks.
This is the S&P 500 MarketCarpet from noon on Wednesday. Discover how among the largest market cap names, together with AAPL, NVDA, META, and AMZN, are glowing with among the brightest crimson on the heatmap? When the “large canine” are driving decrease, our growth-dominated benchmarks have actually no probability to maneuver greater.
As we push by way of earnings season into early November and elections, I will be watching the MarketCarpet each day to search for additional indicators of distribution. As a result of if the generals are struggling, the market as a complete may very well be in for a painful This fall.
RR#6,
Dave
P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!
David Keller, CMT
President and Chief Strategist
Sierra Alpha Analysis LLC
Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled.
The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any approach characterize the views or opinions of some other individual or entity.
David Keller, CMT is President and Chief Strategist at Sierra Alpha Analysis LLC, the place he helps energetic traders make higher choices utilizing behavioral finance and technical evaluation. Dave is a CNBC Contributor, and he recaps market exercise and interviews main consultants on his “Market Misbehavior” YouTube channel. A former President of the CMT Affiliation, Dave can also be a member of the Technical Securities Analysts Affiliation San Francisco and the Worldwide Federation of Technical Analysts. He was previously a Managing Director of Analysis at Constancy Investments, the place he managed the famend Constancy Chart Room, and Chief Market Strategist at StockCharts, persevering with the work of legendary technical analyst John Murphy.
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