Investors enter October in a hopeful mood after surviving September. But the setup is still bearish, as the S&P 500 slipped outside the 5-day moving average envelope and looks exceptionally vulnerable. The market must hold above 4,200 on the downside and get above 4,350 to spark genuine interest.

If 4,200 doesn’t hold, things will get very dicey.

S&P 500

The S&P 500 is acting like a rudderless ship bobbing up and down on the waves.

Heat Map

But the big mega-cap names held up, and that is all this market needs. The fact is that those who think this market can rally without the strong participation of growth stocks and mega-caps are just not being realistic.

That move lower in Energy (XLE) hints at folks ready to take short-term profits.

Market Breadth

Market breadth was shaky on Friday, but the up volume swamped the down volume on the NASDAQ Composite, which sports a chart identical to the S&P 500.

Market Breadth	NYSE	NASDAQ
Advancers	1,293	2,165
Decliners	1,580	2,057
New Highs	23	37
New Lows	85	146
Up Volume	1.76 billion	3.07 billion
Down Volume	2.06 billion	2.00 billion

 

The big news item this week will be the jobs report. There are a few earnings reports on the docket as well.

Portfolio Approach

There are no changes this morning in the Hotline Model Portfolio.

Today’s Session

No shutdown (for now) elicits a big yawn from the market.  Job report weeks are typically angst-filled and trade in narrow ranges, and often with the bias to the downside. 

I expect one big up day and one big down day.

Meanwhile, surging bond yields remain the story with no clear-cut explanation.  Lots of theories and none of them are good. 

Comments

I agree, the SPX must hold at 4200, the 200 day MA. I do not agree that the SPX is acting like a rudderless ship. It has clearly begun a downtrend if one agrees/acknowledges that a series of lower highs and lower lows defines such a trend. Myself, I think the SPX (market) will pause and move sideways for a while at the 200d MA. I think it will fail at that level, plunge through and move lower. I've never thought that the Fed could engineer a soft landing. They were so very, very late to acknowledge that inflation "is transitory." How can one ever expect them to do what is necessary, but politically unpopular for the good of the Nation? At this moment, I for one just can't see it happening Charles A Haselberger on 10/2/2023 11:07:53 AM

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