The stock market ended the latest upward thrust in Aug., when it became overbought on both short
and intermediate term bases. Weakness since the outset of Sep. could be attributable to a work off
of the overbought condition, but extension of a dip here in Oct. sees the market entering more
perilous territory. The indicators have weakened; the SPX has had trouble breaking through a
falling 25 day m/a; the uptrend line in place since Feb. has been violated. Thus, we have red flags.
Bad enough the Fed has been keeping up the hawkish patter on the outlook for short rates. Now
a broad range of fundamental issues have increased player anxieties including the Deutshebank
meltdown, new worries about how troublesome Brexit may become, concerns over earnings, and
the sudden fractures within the GOP just a few weeks ahead of the elections. The latter represents
a rare disruption for the idea of a stable two party system, and with The Donald talking nasty
in the wake of his recent "grab them by the pussy" video, freakish debate performance, and GOP
desertions, the party, long a bulwark of US political life, appears in crisis. A novel uncertainty has
presented itself. All of this has come to pass during the latter stage of a jittery seasonal period.
The market is slightly oversold. For the SPX, there is important short term support at 2125. Breaks
of trend are not to taken lightly. Consider also the NYSE a/d line which shows vulnerability as well.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!