Stock indexes gapped up on plunging crude oil and relief that the hurricane did not cause as much damage as feared. However, shortly after the open the indexes failed to push higher. All buying power seemed to exhaust quickly. The Nasdaq started to reverse into the red first, followed by the S&P. The stayed in the green for much of the session, but finally succumbed. I look at the S&P etf chart to the left shows how difficult this market has been to trade on a short term basis. The swings are fast and turn the other way quickly. The longer term trend has a slightly up bias, but trying to stay on board what looks like an uptrend can be frustrating. Strong sectors today included autos and homebuilders. Commodities got clobbered today on the advancing dollar, in addition to the oil drop. Currency trends can last a long time. The drop in the dollar lasted for years and overshot on the downside. I would expect the new uptrend will go on for a long time and overshoot on the upside. Most analysts seem to think the dollar rally is just a bounce in a longer term downtrend. They may be correct, but I can’t look that far into the future. I can only see what is in front of me, and for now the trend is up.
The chart above is the same S&P etf, but with hourly bars instead of daily. The cycles are a bit more even when viewed intra-day rather than on a daily basis. The double stochastic in the lower sub-graph does a good job overall of tracking the cycles up and down, although this indicator can be misleading when the market decides to start a directional trend.
The October crude oil chart to the right shows the size of the drop. Since this is chart includes overnight data, much of the drop today started last night, which is why there are two large down candles. (The little bar on the right is the evening session as I write this.) The trend has been clearly down as indicated by the blue moving average lines. The darker blue line offered excellent resistance, and the double stochastic offered excellent entry points when it turned down from the overbought zone.
I did change the “Market Mood” graphic. I had the July 4th bear, but thought the roller coaster was more appropriate.