As we head into the last day of the month, what does Robert Knight predict for the stock market for the week starting October 31, 2022? The Indices to Watch Sampler covers the major stock indexes. Note: Paying members receive this report and much more. Get a free TurboTrading 1-Week Trial, or become a paid TurboTrading Member to receive the Stocks to Watch List. Here's the free sample:
Indices to Watch October 31, 2022
SPX: The index may have formed a bottoming pattern (reverse H&S) and broke through the neckline/resistance at 3800 (50 dema, lateral resistance, declining tops line, large round number). Big resistance at 4000 and 4100 (200 dma). Support now 3800. Markets are overbought, though, so it may need to digest the recent moves before continuation can happen.
NDX: The index was up over 3% on Friday reversing a 2-day sell-off. It traded to the 50 dema last week and failed. Resistance 11685 area. It has broken out of the down-trending channel it formed over the last 3 months. Maybe forming a reverse H&S pattern. It needs to get through 11685 to maybe signal a change in direction. Overall, the chart remains bearish.
DJIA: The Dow is the strongest of the indices. Having double-bottomed in early October, it has now surged nearly 15%. It traded up through the 200 dma on Friday and approaching lateral resistance and the declining tops line around 33200. Maybe the Dow is predicting that the world economies are not being negatively affected by higher interest rates. 32000 and 31500 support levels. The index most likely needs to "pause" before we see continuation. 15% is a big move.
DJTA: The Trannies have moved up of support at 12000and traded up through the 50 dema. Key overhead resistance around 14000 (200 dema). The index remains in a down trending channel and is mid channel so it could go either way on the short term. 13400 and 13100 support levels. Most likely, the index needs to digest the big moves before we get continuation.
IWM: The Russell 2000 ETF held the June lows and triple-bottomed. It has moved up through the 50 dema and approaching formidable resistance around $188/$190 (lateral resistance, 200 dma, declining tops line). It may need to digest its recent 12% move and break through resistance before we see continuation. Most likely it pulls back from this level to test $177/$175 support area.
FAS: The financial sector ETF has traded up to the top of a strong down trending channel. With markets overbought, I would expect it to fail at the $76 level. Support $67. Resistance areas $83 and $89.
LABU: The biotech ETF has broken out of a declining channel but remains in a trading range between $6 and $8. Through $8 and it probably trades to $9.85 then $11.35. A range break over $8 would be bullish for the sector having been beat up so badly over the 2 years.
SMH: The semis have broken out of a short-term declining channel but overall it remains in a strong down-trending channel. Resistance at $197 (50 dema) and $200 (lateral resistance). It is down nearly 50% from its highs but the chart is still bearish. On the short term, it could go either way as it is mid-channel.
GUSH: A strong reversal for oil stocks after failing at the $200 key resistance level. Support $179 and $162 for starters. $85/bbl for oil is still lots of money for oil companies to make strong profits. Any upward movement in oil prices and we should see GUSH trade through $200.
NUGT: Gold stocks failed at the 50 dema. Support $23.65 and then $20. Maybe it is forming a bottoming pattern. But the commodity itself remains in a bearish pattern.
Technical Indicators: The McClellan Oscillator is registering extremely overbought. 61.66% of stocks are above their 40 dma and VIX sits at 25.75. With 2 of the 3 indicators neutral we may see markets trade sideways as the recent gains are digested and more internal energy is generated. The next few weeks will give us a better idea of direction for markets going into the year-end. Maybe we get a strong "Santa Claus" rally for the year-end.
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