Caught Between a Rock And a Hard Place

Posted by jbrumley on October 17, 2023 8:59 PM

Were it just one day, we might dismiss is. To see the stock market remain trapped between a narrow band of support and resistance for two days in a row though? That’s worth pointing out.

Take a look. On Tuesday (and for the second consecutive trading day), the NASDAQ Composite briefly moved above its 50-day moving average line (purple) but failed to close above that mark. The bulls are hesitating when and where it matters the most.

The S&P 500’s doing the same thing. That is, as it nears a pivotal line in the sand near 4404 (where the 50-day and 100-day moving average lines just converged) it’s retreating. In fact, a horizontal ceiling at 4390 (purple, dashed) appears to be materializing. That’s where the index has peaked for most of the past six trading sessions.

There’s one additional noteworthy element evident on the S&P 500’s daily chart though… a somewhat bullish one. That’s the way the index appears to be finding support around 4331 (yellow, dashed). That level was a floor back in June and August, as well as a ceiling a couple of times since then. There’s still plenty of tools for the bulls to work with if they want to get the market up and over its current hump.

In this same vein, the NASDAQ Composite’s 20-day moving average line (blue) at 13,359 is clearly serving as a technical floor now. The interpretation of that action is the same as that of the S&P 500’s floor.

For now, the smart-money move is just sitting tight and waiting to see where this goes. We knew there would be something of a battle here, as both sides of the table have several places they can dig into all around here. That’s all they’re doing.

That being said, don’t forget about the volatility indexes. They’re arguably telling us more about the market’s next big leg than the indexes themselves are. Both the VIX and the VXN are testing important technical ceilings right now. Neither of them, however, have shown any real strong desire to blast past that resistance in a way that drives the stock market itself lower.

Should that selloff get going in earnest, the next technical floors for both the S&P 500 and the NASDAQ Composite are their respective 200-day moving average lines (green).

First things first though. Those last-ditch floors may never even come into play in the foreseeable future.

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