Two weeks ago, we highlighted that the market’s generals were beginning to retreat. Last week, they came under a heavy barrage and did not handle it well. The week culminated with the major “AI” companies under significant pressure, killing the market’s chance for a seasonal month-end rally.
Now we will see if the bulls can regroup.
S&P 500 and NASDAQ 100
Those who have been following along each week know that we have been highlighting the possibility that the major indices would pay a visit to their respective 60-week moving averages.
Last week, the NASDAQ 100 did just that.
Will the S&P 500 do the same?
Source: Optuma
The Mag Seven
The generals cracked under heavy fire. Thursday brought a gap lower and a break through the 50-day moving average, followed by another gap lower on Friday.
The 200-day moving average is now in play, and the bulls better hope it holds.
Source: Optuma
Seasonality
The market bucked a key seasonal trend thanks to weakness in the Mag 7. Based on data going back to 1947, the final week of October tends to be strong.
This year was another reminder of why we deal in probabilities, not predictions. Just because something tends to happen does not mean it is guaranteed to happen.
When a market fails to behave the way it historically “should,” we pay attention.
Source: Optuma
International
While all eyes remain focused on the AI theme in the United States, many investors missed the fact that international stocks once again failed to maintain their outperformance relative to the S&P 500.
Both the absolute price trend and the relative trend are now below their respective 40-week moving averages.
Source: Optuma
Final Thoughts
The generals came under heavy fire last week, swamping out the market’s tendency to exhibit strength during the last week of October. When the market is “expected” to act a certain way, and it does the opposite, sit up and take notice.
For now, good and bad, the market is at the mercy of the Mag Seven and other Mega-cap names.
