Wait for a Better Entry Point

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The Dow Jones Industrial Average fell 0.5% Friday, but rose 8.5% in October, its biggest monthly gain in four years. It was not alone. The other major indices experienced modest losses Friday, but the S&P 500 jumped 8.3% for the month and the Nasdaq rose 9.4%.

Financial stocks lagged on Friday, off 1.4%. And the tech sector was down 0.7%, with key stocks including Apple Inc. (AAPL), Alphabet (GOOG, GOOGL) and Microsoft Corporation (MSFT) showing weakness.

The energy sector was strong with Chevron Corporation (CVX), Exxon Mobil Corporation (XOM) and Phillips 66 (PSX) all higher on better-than-expected earnings.

Crude oil rose 1.2% to $46.59 a barrel. A lack of supply could boost oil prices next year since the U.S. rig count dropped for the ninth consecutive week, according to Baker Hughes Incorporated (BHI). There are 64% fewer rigs now than at the peak in October 2014.

At Friday’s close, the Dow Jones Industrial Average was off 92 points at 17,664, the S&P 500 lost 10 points at 2,079, the Nasdaq fell 21 points to 5,054, and the Russell 2000 was down 4 points at 1,162.

The NYSE Composite’s primary market traded 1.2 billion shares with total volume of 4.2 billion. The Nasdaq crossed 2 billion shares.

Block trades on the NYSE expanded to 6,068 from 5,161 on Thursday. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, decliners led by 1.5-to-1.

For the week, the Dow rose 0.1%, the S&P 500 gained 0.2%, the Nasdaq rose 0.4% and the Russell 2000 fell 0.4%.

S&P 500 17-Month MA Chart

Our trusty 17-month moving average of the S&P 500 has only double-reversed three times since 1999. It has never triple-reversed, i.e., reversed from a double reversal.

It is now back on a bullish course, triggered by the high volatility caused by a more accommodating Federal Reserve than this method of analysis could handle.

S&P 500 Chart
Click to Enlarge

Chart Key

In a little more than a month, the S&P 500 has jumped from a major double-bottom to the midpoint of overhead that took almost nine months to form. Initial support is at the 2,080 line, but the 200-day moving average at 2,062 is meaningful to most traders. MACD is overbought, and as noted last week, the small caps are not providing the broad market buying I would expect to see in a major breakout.

Conclusion

Note the crown-like triple-top on the 17-month moving average chart, unlike anything in the past 16 years. The monthly bar charts show this “crown” as a rounding top, so we should hesitate before jumping aboard.

At current lofty levels, I see nothing that encourages me to do anything but wait for a better entry point. A penetration of the 200-day moving average could get us in at around 2,050. However, the 17-month moving average at about 2,030 is an important inflection point that will likely support any future selling.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/11/daily-market-outlook-wait-for-a-better-entry-point/.

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