Stock Market Analysis

Thursday, October 26, 2017

Secret Strength Returning to the US Market...

The market continued downwards yesterday exactly as planned, no surprises at all.

Interestingly, even this early in this profit taking phase, I am already seeing some secret strength in the market that seem to suggest that there is very very little downside left. With the S&P500 back down to around the same level I previously predicted the market to go into this profit taking, secretly, investors are beginning to return to the market as the panicking herd sell off.

The S&P500 formed a very nice looking hammer candle yesterday, which is a candle which when occurring around such short term retreats usually mark a reversal point or at least near to one. Looking back at the past few of such profit taking phases, we can see similar candles marking the area where the S&P500 turns back up around.

Another thing I like is how the total equities put call ratio surged powerfully from a call options inclined position straight into a put options inclined position. You guys know what I always say about big moves like this, right? Yes, that its usually the opposite. Instead of a bearish signal, this is actually a very bullish one as it suggests an overdone sentiment which  usually leads to the opposite result.

All in all, this profit taking phase might end sooner and shallower than I originally expected and that played nicely into my advise over the last few reports to not try to profit to downside but to use the opportunity to build positions for the next upside.

This Friday's upcoming Q3 GDP report isn't likely going to surprise to downside since it is largely expected to retreat from last quarter's high. As such, any surprise would more likely come from the upside than downside... could that be the catalyst to return the market to a bullish stance?

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For now, the market remains in short term neutral trend within an intermediate and primary bull trend.

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