Why the End of October Sets Up as a Major Turning Point
Like a body hit by a stroke that sucks the life from one side while leaving the other worryingly perfect, half the market hovers near all-time highs (exemplified by names like AAPL, MSFT) — while many former high-fliers such as MDB, TEAM, and OKTA have crashed and burned.
That said many of the former glamours that led the advance since late December such as SHOP and ROKU rebounded sharply into mid-October while others such as MDB, COUP and TWLO are testing their late September/early October lows.
Whether the tests are successful looks like this weeks business, which is consistent with an end of the month inflection point in the SPX and NAZ as shown below.
The end of October will be 90 degrees/days from the late July ATH and 180 degrees from the late April/early May top.
The question is, will a high to high to high or a high to high to low cycle play out?
If the SPX is still holding 2980-2900 support, by the end of October we may get a breakout above the well tortured 3000 region and a run to 3100.
3100 represents the top rail of a trend channel.
A breakout would inject a shot of bullish sentiment into the markets, which may be just what the doctor ordered before a knife below 2880.
This is just the kind of perverse irony that Mr. Market relishes: while Octoberphobia scared The Street into no-man’s land—especially on the well-advertised 90 year cycle of the ghoulish 1929 crash, it would be fitting for Mr. Market to revisit the ghosts of fall crashes past, once the last brick is laid on the October Wall Of Fear …on October 31.
Be that as it may, this is a busy earnings-related news week and the something unexpected could frighten the daylights out of market participants.
It may not be so much in the earnings, but moreso in the outlook with political and geopolitical concerns reigning.
A NAZ weekly clearly carves out the inflection point presented.
The NAZ sits at the apex of a rising trendline from the December closing low and a declining trendline from the July top.
A trendline connecting June low and August low currently ties to the NAZ 50 week moving average.
In conclusion, I think the next few weeks will determine the path for the end of the year and the next two months will determine the path for 2020.
It depends on the structure of the next meaningful sell-off and the next meaningful rally.
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