Taking Stock - Week of October 26, 2020

 I've been posting the daily DJI30 updates from my FaceBook page at the end of the week for a few weeks now.  Starting today, I'll be putting them up each trading day [if I remember.]

I am neither a financial advisor, nor a stock analyst.  I'm an old man with an attitude, some curiosity and an internet connection.  Add NaCl to taste.

Monday, October 26, 2020

Bright Flashing Screaming Red Arrow Down

DJI30 index at the close   —-   27,685.38   -650.19 (-2.29%)

The Index opened at 28186, off 150 points, and that was only the beginning.  It immediately dropped to 28033, off 303.  Then the decline shifted from precipitous to a steep tumbling slide.  There was nothing resembling even a minor rebound until it hit the  low of 27317, off a cool 965 points at 1:30.  It rebounded almost 300 points to 27620, down a mere 716.  Support near 27530 was solid the rest of the day, and there was a rise of about 160 points in the last few minutes.

This is a clearly down day, and quite dramatically so. The hi, lo and close were off by 250, 780 and 650 points, respectively.  The index blasted through the 55 day EMA and round number resistance at 28000.  It slid through 27500, but didn’t maintain the lo. Last Thursday I mentioned support in the lo 27000’s, and that was in effect this afternoon. 

The day’s span was 816 points, the largest since 875 on 9/04. That was a Thursday, and I said this: ”On Wednesday it was up, up and away.  Now we have to wonder if this is the end, and where the bottom might be.”  It was the end, at least for that thrust.  And now I’m wondering again - or maybe still.

Pundits are blaming the double whammy of the CV-19 surge and lack of stimulus for today’s decline.  But these things are not shocks. They’ve been obvious for a least a couple weeks.  Ignore the pundits.  There is good news and bad news every day; and if the market reacts to them at all, it is in a way that is both trivial and ephemeral.

Anyone who reads these posts regularly [if such persons in fact exist - say hi in comments of you do] will not be surprised to find that I am not surprised by today’s plunge.  You know not the day nor the hour, but I was quite sure we were on the verge of some sort of a decline.  Upward momentum peaked in the first week of September, and momentum has been sideways since.

Sideways momentum also happened after the 6/08 high.  The ensuing lo was on 6/26, but momentum wasn’t clearly up again until the beginning of August.  After that was a very good month.  The August 3 close was 26664; the September 2 close was 29101.  That was a tidy gain of 2436 points [9.14%] for anyone who was able to capture it.

But for now, at least, the party is over.  I have no idea how long the decline will last nor how lo it will go.  Just a few months ago in March the Index bottomed at 18592.  The entire year of 2018 was a bust.  But memories are short, and irrational exuberance is greatest at the peak.  For asset appreciation, the time to buy is when gloom and doom are everywhere, and all the excesses have been wrung out of the market.  This is not that day.

There might be a partial recovery tomorrow, but I think that now there will be a downward thrust of some duration, and it’s going to be weeks to months before the Index exceeds 28500 again.

Closings -

10/26/18 - 24688

01/02/20 - 28869

09/25/20 - 27174

10/26/20 - 27685

NYSE internals -

A/D = 388/2697 = 0.14

A/D Vol = 0.10

New Hi/Lo = 14/45 0.31

Tuesday, October 27, 2020

Red Arrow Down

DJI30 Index at the Close   —-   27,463.19   -222.19 (-0.80%)

The Index opened at 27651, off 34 points.  It approached 27700 twice in the first 50 minutes, reaching a hi of 27008.  It reached a low of 27536 before 10:30, jumped up above 27625, then repeated that action two more time.  On the 4th try it hit a marginal new lo at 27462.  There was one more bounce to 27550 followed by the day’s lo of 27485 in the last few minutes, just 5 points below the close.  The span was 250 points, the lowest since 204 on 10/13.  The 10 day average is 385.

All this intra-day bouncing around is counter-current to the downward thrust.  I would not have been surprised by a positive outcome today, but all we got was a low 88 points above yesterday’s. Meanwhile, the hi was off 478 from yesterday’s, and only 22 above yesterday’s close. Momentum has clearly turned down.

The SP500 also zig-zagged today, centered around the null point and finished down 0.3%.  The RU2000 was down almost continuously from shortly after the opening, and finished down 0.9%.  But the NASDAQ was up all day and finished with a 0.64% gain. This is more market fragmentation.

Fasten your seat belt and put on your crash helmet.

Closings -

10/25/18 - 24985

01/01/20 - 28869

09/25/20 - 27174

10/27/20 - 27463

NYSE Internals -

A/D = 942/2086 = 0.45

A/D Vol = 0.34

new Hi/Lo = 31/34 = 0.912

Tuesday evening Update

I haven't been paying attention to the NASDAQ, but took a look at it this evening. I put an exponential best fit exponential curve through the data from the beginning of 2010 to now.

Mean reversion is real, but inexact. Typically the Index will run on one side of the best fit curve for a while, then cross and run on the other side. Occasionally, it will bounce off the curve and return to the same side.

So, despite mean reversion being real, for the Index to be at or near the curve is not typical, and overcorrection is the norm.

In the last two years the deviations have been extreme. At the 3/23/20 low, the Index had fallen about 22% under trend. At the 9/02/20 hi, the Index was above trend by about 18%. One could have gotten rich in about 6 months. Now it looks like the correction has already started. and momentum is downward. If the correction is as extreme as the current situation, the Index could go below 9000.

NASDAQ since 2010

NASDAQ in 2020

Wednesday, October 28, 2020

Flaming Red Arrow Down

DJI30 Index at the close   —-   26,519.95   -943.24 (-3.43%)

The Index opened at 27102, the day’s hi, off 361 points, and immediately plunged to 26880, off 583.  It hit a lo near 28600 before 11:00, bounced a bit, hit the low again at 11:30, and after rising to 26800 dropped to 26554 at 1:15.  At 3:30 it climbed slightly above 26750, then dropped a hard 210 points into the close, which landed only 23 points above the low.

This is the worst clearly down day in months, with the hi, lo and close off by the jaw dropping amounts of 606, 961 and 943, respectively.  In Elliott wave terms, it’s 3rd wave down territory, and I suspect it’s not over yet. 

I see this being blamed on the CV-19 surge, and no chance of stimulus in the near term.  As I’ve already stated, these things are very emphatically NOT new news.  Forget the news, forget the pundits, turn off TV - the market runs on emotion, and for now, it is negative.  The bottom is not yet in sight.

There could be round number support at 26500.  The Index spent most of the day bouncing up from 26600, plus or minus a few dozen points, before the plunge into the close. The 9/24 lo was 26537, just 17 points above today’s close; and there was a cluster of support around that level in July, before the August surge.

A counter-current move up tomorrow, even of several hundred points, would not surprise me, but it will be temporary, and  IMHO, the current move down is far from over.

Closings -

10/26/18 - 24668

01/02/20 - 28869

09/28/20 - 27584

10/28/20 - 26520

NYSE Internals -

A/D = 268/2834 = 0.09

A/D Vol = 0.09

New Hi/Lo = 14/98 = 0.14

Thursday, October 29, 2020

Green Arrow Up

DJI30 Index at the close   —-   26,659.11   +139.16 (+0.52%)

The Index opened at 26481, off 39 points; dropped to 26291, off 229; and rose to 26609, up 89, all in the first 33 minutes.  A hi of 26693, up 174 was reached at 10:40.  That value was exceeded after 1:30, on the way to the day’s hi of 26892, up 372, before 2:30.  From there, it was a slide of 233 points into the close.

The other Indexes were alsoup today, each by more than a percent, so the DJI is the laggard.

Despite the minor gain, the day’s hi and low were lower by 210 and 207 points, respectively.  The total span was 601 points, about the same as yesterday’s 605.  This is counter-current to the main thrust down.  So the downward thrust is not yet complete.  The 233 point slide at the end of the day reinforces this view.

Closings -

10/29/18 - 24443

01/02/20 - 28869

09/29/20 - 27453

10/29/20 - 26659

NYSE internals

A/D = 2016/1039 = 1.96

A/D Vol = 2.49

New Hi/Lo = 20/87 = 0.23

Friday, October 30, 2020

Red Arrow Down

DJI30 Index at the close   —-   26,501.60   -157.51 (-0.59%)

The Index opened at 26572, off 87 points, and immediately fell to 26529.  It reached 26429, off 230 before 10:00, and 26156, off 514 at 11:00. It bounced up to 26460.  The lo was challenged again after 2:30, but held.  From there trading had a slight upward slant, followed by a 295 point rise into the close in the last 20 minutes.

Despite the strong finish, this is clearly down day, with the hi, lo and close off by 253,147 and 158 points, respectively.  The Index seems to be drawn back to the 26500 level, which should now be resistance. It also seems that 26150 might be support, but that span is unrealistically thin. Meanwhile, the Index is in the range of values we saw from mid-June through mid-July.

Momentum is clearly down.  There is no reason to think the Index is near a bottom.

This wraps up the week and the month.

Monthly closing changes, Sept 30 to Oct 30.

DJI 30:  27782-26502 = -1280; -4.6%

NASDAQ: 11168-10912 = -256; -2.29%

S&P 500:  3363-3270 = -93; -2.77%

DJI30 Closings today -

10/30/2018 - 24875

01/02/2020 - 28869
09/30/2020 - 27782

10/30/2020 - 26502

NYSE Internals -

A/D = 1186/1862 = 0.64

A/D Vol = 0.75

New Hi/Lo = 19/64 = 0.297