The major US stock indices are still up on the week…
The broader S&P and Nasdaq indices are both down over 2.2% on the day. The S&P is down -2.22%. The Nasdaq is down -2.85% That’s horrible.
However, both indices still remain up on the week.
Yahoo! Yippee! What a great starrt to October.
A week ago the NASDAQ index and the S&P index both closed just off there lows for the day and the lowest levels for the year. The S&P closed just below its 200 week MA. The Nasdaq closed below its 200 week MA for the 2nd week in a row. It was the month end/quarter end and September is a seasonally bad month for stocks. It was indeed a bad month.
This week, the indices squeezed higher on Monday (the month got off to a great start). On Tuesday they added to the gains. Yesterday’s intraday high took the Nasdaq up 6.22% from the Friday close, but sold off into the close. The closing level was still up 4.74%. Not bad, but is it?
Today more has been lost and the index is now up just 1.43%.
For the S&P it moved up 6.22% from the close to the intraday high on Wednesday. It is now up 2.25%.
There is time left in the day, but the when they close the books on week #1 of October, it will likely still show a gain for the week for both broad stock measures. The S&P might even rise by more than 2%. Not bad.
But is it? Underneath the price action shows a dead cat bounce.
Technically speaking:
- For the Nasdaq index, the price corrected to the 38.2% retracement of the move down from the September high near 11229.93 and stalled (see chart below). That was the minimum retracement to get to and through to give the buyers more confidence. That attempt failed.
- For the S&P it fared a little better on it’s bounce. It DID get above the 38.2% from the September high at 3787.27 but fell well short of the 50% target at 3850.02. The close on Tuesday was right near the level. The “tries” above the retracements on Wednesday and Thursday still closed below the 38.2% retracement level. Once again the retracement was the minimum target given the trend move lower. The price could not sustain the breaks. Failure.
What about the 200 week MAs?
For the Nasdaq, I outlined the 11130 level as a key upside target for that index in my video from Monday’s trading (see video here). The price did extend above that 200 week MA level this week, but closed back below the level yesterday and is well below that MA level now. It will be the 3rd close below the 200 week MA which has not occurred since 2010.
For the S&P index, it’s 200 week moving average comes in at 3594.49. The current price is still above that level at 3661.64.
However, if the dead cat bounce seen this week has follow through selling next week, closing below that level for the 2nd time in 3 weeks is well within the sites for traders.
Stock buyers had there shot this week. Closing back above the 200 week MA would have been a good signal for the Nasdaq. Bouncing higher away from the 200 week MA on the S&P was also good news. However, the retracements fell woefully short of the upside targets and the price action today is not looking good for the price action. It is not looking good.