October 25, 2015
Weekly Market Outlook
By Keith Schneider
Vintage 1957 250 California Spyder
Wow, what a week as memories of October crashes and calls of market tops have the shorts gasping for air. The market was set up perfectly for central bankers to trap shorts. Already in rally mode in October coming off the oversold conditions triggered in August, the key benchmark S&P 500 (SPY) closed this week up about 2% and the NASDQ 100 closed up a scorching 4.3%. The yellow flag is IWM (Russell 2000) which has been lagging quite a bit, closed up less than .3%.
The NASDQ rise was the biggest weekly gain since 2011. Seems like NASDQ 100 is taking its cue from Ferrari (IPO’d this week), handling the art of hairpin curves and high speed performance with aplomb!
The trifecta that sent stocks soaring included announcements of further monetary easing by both the ECB and China, oversold internals with high cash levels (we highlighted that last week) and blowout earnings and stock buybacks from Amazon and Google. This took both companies to new all-time highs.
For now the move in late August looks like yet another a fake out as the bull market here in the US still appears intact. In fact, the NASDQ 100 is just a few clicks away from new all-time highs and Friday’s action is a runaway gap on big volume, which is bullish.
The 65 week moving averages which is a great long term trend indicator was penetrated to the upside (bullish) on Friday and we also moved into the meat of the 6 month calendar range, a definite upgrade as well. Other indicators are not even overbought as of yet so there might be more to the upside with the caveat that volatility (VXX) remained steady throughout (closing up 2%) Fridays sharp incline.
Let’s go to this week’s video where we look for critical support levels.
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