Trade Alerts

Are We In Another George Costanza Market?

10/27/2016

Folks-

In an episode of Seinfeld George Costanza decided that all his instincts were wrong and he would do everything opposite of his knee jerk actions. He got the girl, he got the job, and he got some way oversold self confidence. Pretty funny bit. There have been times when the stock market takes on this contra behavior and we may be in one of those periods. Not so funny.

Last Monday stocks appeared ready to begin a process of a collective breakout only to rollover and climb back into its confining dungeon of a trading range. Take a look at the Nasdaq 100 below, a clear break above its recent base and closing at its highs for the day (just nine points from an all-time high). Very bullish. Then giving it up and quickly retreating to the bottom of the base. A pretty typical, relatively dependable buy signal became a sell signal.

ndx-10-31

 
Below is a daily chart of the Russell 2000 SmallCap Index. It is the quintessential Canary in The Coal Mine the Bears are pointing to. A serious and forceful break of multi-month support. This is often what the beginning of a meaningful correction looks like. We’ll see.

rut-10-31

 
Here is the most watched index in the world, the S&P 500. It is sitting just above the support level every technician (myself included) needs to hold (2120ish). I have a feeling it may break that area only to pull a Costanza on us, not follow through and become a buy signal?

spx-10-31
 

I had planned to write a more extensive piece this weekend, but like the trading range limits volatility, it also can limit topics to write about. For volatility we have to turn to the political pages. For now just waiting now to see if the GC market plays out for a while. I have a feeling it might.

Happy Festivus, I mean Halloween,
Max Power

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