Just after Mid-day, most of US indices remain higher by 0.30-.45% while Europe managed to claw back and close down around 0.75% , a bit off earlier lows. Breadth is higher by around 2/1, and if we hold at current levels, we would prevent indices from closing down for that 9th straight day a feat which hasn't occurred in over 30 years.. Healthcare is leading all sectors today, trading up 1+%, while Industrials and Materials both are also outperforming, with only Consumer Staples down on the day. Treasury yields have pressed down further in the last few hours while the Dollar index is sliding further, down now 5 of the last 6 days and has lost about 2 cents of value this week, stripping about 40% off of the gains which have occurred since August lows.
Overall some definite positives today we're seeing continued strength in Transportation with the DJ TRANSPORTS higher by over 1%.. Smallcaps also look to be trying to turn back higher after sharp gains here to the tune of 1.6% which is a big difference than most of what occurred throughout the month of October. While breadth and momentum remain anemic, indices have gotten oversold with Daily 14 period RSI dipping down under 30 the other day for the first time since January but obviously still quite neutral on a weekly basis and downwards slanting on a weekly basis and some definite evidence of negative momentum divergence in MACD on a monthly (Higher highs into this past Summer's highs vs 2015 while momentum remained at far lower levels, and since has rolled over negative) Fear never quite gave the market the buy signal it was looking for either despite Equity Put/call getting up over 1.. as we never saw that TRIN reading in excess of 2 which shows an excessive amount of volume on the downside that can normally drive Lows.. nor ViX backwardation to any real extent. Yet Demark indicators look to be very close to lining up with counter-trend exhaustion signals across the board (TD BUY SETUPS) on SPX, IWM and BWORLD index within a day.. while NDX still requires another move down to new lows for this to happen, which very well could happen into the election.
While today's meager bounce has broken out of a minor 3 day downtrend, the trend from the last couple weeks remains firmly negative and still not much to suggest that we're quite there in trying to buy dips. However, the risk/reward for shorts is starting to look worse given the possibility that Small-caps and transports could begin moving higher while indices had reached oversold levels and the US Election certainly will clean up the uncertainty and help establish a bit of clarity "HOPEFULLY" :) with regards to the POTUS choice. For now, most technical signs point to 1 more low into early next week. Whether its right to chase that and/or hold out before covering shorts depends on most people's risk tolerance and patience- I don't mind covering shorts small and starting to nibble on various things (Healthcare being 1 group in particular) but it's still tough claiming that we're there just yet and we'll need to see quite a bit of POSITIVE breadth and volume on the upside ALONG with price and structural improvement to think equities are back in the clear and rallies can take hold. For now, holding here by the close would be a minor positive, vs giving it all back, but on rallies Monday, most would be wise from a trading standpoint to reduce risk into the election, which very well could prove volatile afterwards given the ongoing negative momentum and bearish trend. SPX getting BACK above 2114 would certainly be something to pay attention to, and could lead to some short covering for the Cash index while 2107 remains important for futures. Until that happens, it's tough making too much out of today.. but just important in mind the beginning of a few positives that WEREN"T in place earlier in the week