The popular averages closed mixed on Wednesday. New home sales rose less than expected in September. The trade in goods deficit narrowed in September.The Markit services PMI has improved this month. Meanwhile the prices of crude oil and gold fell on Wednesday.
Above is my 3-month chart of the S&P 500. The big jump following the Brexit scare in late June led to a more gentle rise beginning in mid-July resulting in several SPY records. Then came the huge drop on September 9 through the 50-day moving average amid heavy trading volume. This resulted in a big gap, i.e. the session’s high was significantly lower than the previous session’s low. The large jump in the VIX (volatility index) appeared to be a sign of panic. The sharp fall through the 50-day MA would not ordinarily be seen as a good sign.
The strong bounce on September 12 touched the SPY’s 50-day moving average but failed to fill the gap. Since then there has been a series of sharp moves in both directions creating a couple of smaller gaps. The SPY tickled its 50-day MA during several sessions in recent weeks without closing above. That barrier will have to be clearly breached before I can consider repainting any of my outlook arrows green.
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