The mid-terms are now somewhat behind us, and this week we saw the FTX crypto exchange file Chapter 11. Some investors worry that there might be more domino effects in the institutional crypto space. It is worth keeping an eye on.
Concerning the market, the mild CPI inflation numbers caused a rally to erupt. Yields plummeted, the dollar softened, precious metals exploded higher, and investors had an economic reason to support a Fed pivot. All indices improved their market phases this week, with Grandpa IWM and DIA closing above their 200-day moving averages; SPY & IWM are back above their 50-day moving averages. However, the SPY, IWM, and QQQs are all overbought on price and momentum, according to MarketGauge's Real Motion Indicator, and may ultimately be subject to mean reversion.
With high inflation and global central banks tightening, where do the indices go from here?
Looking at past seasonality patterns, the fourth quarter has strong mid-term election past bullish seasonal trends.
The bear market between January 1973 and December 1974 was one of the worst. In 1974, the S&P 500 increased by 20% in October and November before reversing most of the gains in December. Looking at prior bear market patterns and all three indices helps provide perspective on the overall market's direction.
SPY still has work to do before breaking out of its current trading pattern. The DIA and IWM have the most potential for growth in the short term. It's fundamental to understand where each index is trading relative to one another. The next several weeks should reveal which way these indexes are trending and whether they are trending in the same direction.
The perception of lower inflation also spurred the gold market to new highs and improved its market phase. Gold closed over its 200-day moving average and transitioned from bearish to an accumulation phase -- which has paid off handsomely for subscribers.
The sector leading the market up is Biotech (Sister Semiconductor), which is breaking out of a massive head-and-shoulders pattern on the daily chart, which we covered in live training yesterday. We also suggest paying attention to the indices' November 3 lows and any measured moves into resistance, such as critical levels like 420 in the SPY.
Risk management (Mish's specialty) is especially key in these volatile markets, and if you are not yet a subscriber to Mish's Market Minute Advantage service, now's the time!
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Mish in the Media
Read Mish's latest article for CMC Markets, titled "What's Next For Key Sectors After the Midterms".
Mish explains why MarketGauge loves metals and is still patiently loading up equities on Business First AM.
Mish talks metals, rates, dollar, and which sector to buy/avoid in this appearance on UBS Trending.
Mish joins Cheddar to talk about some of the fallout from the most recent Fed Meeting.
Click here to see Mish and Helene Meisler's panel at the Trader's Summit event!
Mish discusses Meta and Palantir and how trends are switching in this appearance on BNN Bloomberg.
- S&P 500 (SPY): 394 support, 402 resistance.
- Russell 2000 (IWM): 183 support, 190 resistance.
- Dow (DIA): 333 support, 341 resistance.
- Nasdaq (QQQ): 283 support, 291 resistance.
- KRE (Regional Banks): 63 support, 68 resistance.
- SMH (Semiconductors): 215 support, 224 resistance.
- IYT (Transportation): 225 support, 233 resistance.
- IBB (Biotechnology): 132 support, 136 resistance.
- XRT (Retail): 63 support, 67 resistance.
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