A little late buying yesterday, with thirty minutes left in the session, underscored the effectiveness of technical analysis.

• First - the S&P 500 hit a brick wall at a key resistance of 4,600
• Second- the S&P 500 bounced at a must-hold support of 4,200

However, if 4,200 fails, there are pockets of support, each one hundred points lower to 3,800.  Meanwhile, Consumer Discretionary (XLY) was the hardest-hit sector.

 

The Consumer is Strong?

Those industries that got a jolt from all that free money and free time (aka, work-from-home) are coming unglued (see airlines).

In the session, the biggest decliners were environmental stocks, Veralto (VLTO), cruise ships, Carnival (CCL) and Royal Caribbean Cruises (RCL), and some Utilities (XLU) that didn’t bounce, AES Corp. (AES).

Market Breadth

Breadth was overwhelmingly bearish as panicked investors ran for the nearest exits. The overall volume picked up as the down volume swamped the up volume.

Market Breadth	NYSE	NASDAQ
Advancers	475	971
Decliners	2,473	3,422
New Highs	10	20
New Lows	443	580
Up Volume	759.13 million	1.48 billion
Down Volume	3.18 billion	3.13 billion

Internal Breakdown

Even before yesterday, the October bounce had been one of the most lackluster on record (240 days +).

When the dust settled, less than 8.0% of the S&P 500 traded above the 50–day moving average. And only 35% are trading above their 200-day moving average.

A Fear Show

How ironic that the market imploded after Congress avoided a government shutdown. Maybe it was the House Speaker drama. Now, the Fear & Greed Index is firmly in the ‘Extreme Fear’ zone.

The (potential) good news is the current level is associated with significant oversold periods.

Portfolio Approach

We closed a position in Consumer Discretionary in the Hotline Model Portfolio.

Today’s Session

The ADP Jobs report came in significantly below consensus with several flash points that the market should be cheering.

That said, this report is not designed to be a harbinger of the government’ jobs report, which will be out this Friday, but the key points are intriguing and important.

The rate of change is noticeable.  Both are trending lower.

ADP peaked in June.

BLS peaked in January.

Declines in manufacturing and trade are also disheartening, as those are areas for less skilled workers to train up and earn more than in leisure and retail.

This is the part the Federal Reserve is watching closely.  Job changers enjoyed two years of double-digit wage increases and now it’s in the single digits and dropping fast.

Coiling Spring

I think the market is becoming a coiled spring, but right now, the hits on disappointments outweigh the urge to jump ahead of the news/signs we are expecting.

Comments

My guess is that what just happened in the House was the major reason. To say it was unprecedented would be an understatement regarding the potential future impact around anything getting accomplished. The 8 just throw the dems a softball pitch and they knocked it out of the park with bases loaded. Terry Dowler on 10/4/2023 8:47:31 AM

Tell me when the government has done anything to help the market. Progressives are doing their best to turn us into a 3rd world country. Sad isn't it? Don Lauro on 10/4/2023 9:44:40 AM

You must be smokin sumptin if you think 4200 is going to hold. Look at those rising bond yields. That's the real story. Inflation is the problem! Charles A Haselberger on 10/4/2023 9:51:48 AM

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