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Issue #830 
October 1, 2023 , | Newsletter
The newsletter with chart analysis for stocks and stock indexes |
Stock Indexes Analysis/Evaluation
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| Bears remain with the edge, but confusion remains.
DOW Friday closing price - 33507
The index market generated a mixed week with the DOW closing down 1.4% below the previous week's close, the SPX, closing down .8% below the previous week's close. On the other side of the coin, the NASDAQ closed .0066% higher and the RUT closing .006% higher. In addition, the DOW generated a new sell signal on the weekly closing chart and the SPX confirmed the sell signal given the previous week. In looking at the monthly chart, both the DOW and SPX broke a minor monthly close support level. Adding to the mixed results, the DOW and the RUT closed in the lower half of the week's trading range, suggesting further downside below last week's lows will be seen this week. Nonetheless, the SPX closed exactly in the middle of the week's trading range and the NASDAQ close slightly in the upper half of the week's trading range. What all this means is that the outlook for the beginning of October is mixed to the nth degree. Then again, all indexes closed near the lows of the month, suggesting that at some point in the month, the indexes will go below last month's lows.
This outcome for the week was unexpected as it was expected that some clear direction would occur. Now, the traders will need to put their attention to this week's economic reports, such as the ISM Index and Jobs report, and see if there are any big changes there (not expected) and then perhaps even wait for the new earnings quarter that begins the following week, before deciding anything. Once again, no clear direction has been established and also once again, the traders will wait for news before deciding how to go.
One thing that did happen in September is that the seasonal pattern did occur and it occurred clearly. The DOW fell 3.5%, the SPX fell 4.9%, the NASDAQ fell 5.1% and the RUT fell 6.1% in September. That was more than the average of 1.5%.
The seasonal pattern for October is that of it being an up month with a .6% gain. Nonetheless, the seasonal pattern for October is that it is a volatile month and there have been crashes in that month. In fact, October has the reputation of it being the biggest crash month in history, with it dropping 17% in 1998 and in 2007. The fundamental outlook does not support that kind of a drop occurring this month but the fundamental outlook also does not (at this time) support a rally either. As such, the probabilities do favor further downside occurring, with the question being "by how much?".
There are still some clear levels of support that if broken, would generate automatic selling. The NASDAQ has pivotal daily "and" weekly close at 14694. The daily close support at that level did get broken on Wednesday with a close at 14545 but the break did get negated on Friday with a close at 14702 and on Friday at 14715. By the same token, the negation was not clearly stated, meaning that it is still close enough for a break to occur this week. A daily close below 14545 would do it! By the same token, a close next Friday below 14694 would do the same.
The DOW did break daily close support at 33734 as well as broke the 200-day MA, currently at 33803. The index basically has open air below to 32764, which is another 765 points below Friday's close. The SPX did break its daily close support at 4328 but the bulls were able to keep the index above the 4280 level, which is a previous high weekly close of importance. By the same token and on a daily closing basis, that same level was at 4305 and it got broken on Wednesday and was confirmed with a close on Thursday at 4299 and on Friday at 4288. This means that another daily close below 4274 (Wednesday's close) would open the door for a drop down to the 200-day MA, currently at 4199 (89 points below Friday's close). As you can see, the probabilities are favoring the bears but it is a mixed picture.
As far as the upside, the bulls need to get the DOW to close above 34472 in order to say that the correction is over. The SPX requires a close above 4425 to do the same. In the NASDAQ the level is at 15185 and in the RUT that level is at 1896.
This week the following reports are due out. On Monday at 10:00am, the ISM Index is reported (expected number is 47.6). On Friday, it is the Jobs report (expectation is for a 160k number). It is doubtful either of these reports will surprise, especially to the upside, which is what the bulls need.
Based on the ability of the bulls to avoid a strong sell signal this past week, it does suggest that the bears still have a short-term edge but not total control. It does seem that there will be more volatility this week with some rallies but with an overall more downside (though slow and somewhat limited). The monthly chart of the SPX suggests that October may end up closing around 4130 (a drop of 158 points - a 3.7% drop from September's close).
OIL had a very volatile week in which it made a new 13-month intraweek and daily closing high on Wednesday above 92.64 (after the supply and demand report came out). Nonetheless, the breakout was then negated on Thursday with a negative reversal day and a close at 91.17, which in turn was then confirmed on Friday with another close below that level (closed at 90.77). No breakout occurred on the weekly closing chart. Oil closed in the lower half of the week's trading range, suggesting further downside below last week's low at 88.19 will be seen this week. At this time, the closest intraweek support is at 77.59 and it is minor, meaning it is not a support the bulls can depend on. As such, the kind of action seen this past week does require that a new support level gets built before any attempt to take Oil higher occurs. On a weekly closing basis, there is old but decent weekly close support at 85.02 (82.09 on an intraweek basis) and that is a likely objective should this reversal be confirmed on Friday. On an intraweek basis, there is no support below until 84.40 (on a daily closing basis). To the upside and on an intraweek basis, the 93.74 level is now resistance. Probabilities do favor the bears this week.
DOLLAR made a new 10-month intraweek and weekly closing high and closed slightly in the upper half of the week's trading range, suggesting a slightly higher chance of going above last week's high at at 106.84 than below last week's low at 105.52. The Dollar, on an intraweek basis, now has open air up to 107.99. On a weekly closing basis, resistance is at 108.06. There has been no support built to the downside as the Dollar has moved straight up over the past 11-weeks. Nonetheless, now that a breakout has occurred, support on a weekly closing basis is found at 105.21, and on a daily closing basis, it is at 105.12. As such, further upside from here is likely to be slower and include both green and red weekly closes. The chart now suggests that for the month of October, the Dollar will trade between $105 and $108.
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Stock Analysis/Evaluation
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CHART Outlooks
I have no mentions for this week as nothin was clearly resolved this past week. The bears do have a slight edge for further downside but adding additional short positions does not offer a positive risk/reward ratio.
On the other side of the coin, purchasing positions at this time is also not a high probability choice as the index market should continue to be under sell pressure for the next few weeks. It is possible though, that some of the small cap stocks might start to generate some buy signals and if that happens during the week, I will announce the purchase on the message board. The RUT index is showing some signs of being at (or near) a bottom.
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Updates
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| Monthly & Yearly Portfolio Results
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Closed Trades, Open Positions and Stop Loss Changes
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Status of account for 2007: Profit of $9,758 per 100 shares after losses and commissions were subtracted. Status of account for 2023, as of 9/1 Profit of $6,586 using 100 shares per mention (after commissions & losses) 3 Closed out profitable trades for September per 100 shares per mention (after commission)
NONE
Closed positions with increase in equity above last months close minus commissions. NONE Total Profit for September, per 100 shares and after commissions $0 Closed out losing trades for September per 100 shares of each mention (including commission)
XOM (short) $64
Closed positions with decrease in equity below last months close plus commissions. NONE Total Loss for September, per 100 shares, including commissions $64 Open positions in profit per 100 shares per mention as of 10/1
SCCO (short) $465
Open positions with increase in equity above last months close.
CAT (short) $802 SNDL (long) $22 TNC (short) $828 TOL (short) $796 DD (short) $202 PLNH (long) $10 Total $3,125 Open positions in loss per 100 shares per mention as of 10/1
NONE
Open positions with decrease in equity below last months close.
TCEHY (long) $267 Total $1,819 Status of trades for month of September per 100 shares on each mention after losses subtracted.
Profit of $1,1705
Status of account/portfolio for 2023, as of 9/30
Profit of $8,293 per 100 shares.
CAT generated a 4th red weekly close in a row but the bulls were still able to keep the stock from generating a pivotal sell signal, having closed on Friday at 273.00 and the pivotal weekly close support being at 272.56. The same thing occurred on the daily closing chart, given that support is at 269.30 and the stock closed at 269.53 on Tuesday and bounce up from there the rest of the week. Nonetheless, the bounce up was minimal and the stock generated a negative reversal day on Friday (having made a new 7-day high but then going below Thursday's low and closing red, suggesting the first course of action for the week will be to the downside. The inability of the bulls to generate a decent "and" lasting rally from the now decent daily close support at 269.30/269.53 does suggest it will get broken this week. A break of that level shows no support below until 264.54 (on both a daily and weekly closing basis). Nonetheless, that support is from a previous all-time daily and weekly closing basis, that by nature is not more than a minor to perhaps decent support. The monthly chart suggests that a drop down to the $252 will be seen in October. Friday's intraweek high at 279.55 should now be pivotal resistance.
DD generated a positive reversal week, having made a new 10-week low but then closing green and near the high of the week, suggesting further upside above last week's high at 75.46 will be seen this week. By the same token, on Friday, the stock made a new 9-day high but then closed on the low of the day, suggesting the first course of action for the week will be to the downside and below 74.47. There is established intraweek support at 73.77 that is likely to decide whether the stock will ultimately go above last week's high or not. It is important to note that on the weekly closing chart, the stock gave a sell signal 4-weeks ago when it closed below 74.64. The stock closed at 74.59 on Friday, meaning that if the stock closes red next Friday (the most likely outcome), a successful retest of the breakdown point will have occurred. Using the monthly chart, nothing is clearly defined as to what the stock will do this month. Taking a look at the overall market and knowing there has been no news to support this week's rally, the probabilities favor the bears and no rally above last week's high. Nonetheless, if a rally occurs and the stock can generate a daily close above 75.96, it will change the chart outlook in favor of the bulls for a short-term rally. ENG continued to trade sideways as it has done for the 5 months. There is nothing new that I can say this week. Any drop below .30 would be a negative and any rally above .40 would be a positive. LXRX generated a positive reversal week, having made a new 34-month intraweek low and then closing green. The green weekly close also suggests that a double bottom on the weekly closing chart has been built at 1.07/1.07. Unfortunately, the stock did not close in a dependable-for-the-bulls way as it closed near the low of the week, suggesting further downside below last week's low at 1.04 will be seen this week and if the 1.03 level is broken, a new all-time intraweek low will be made. Another negative is that a new all-time monthly close was made as the previous low monthly close was at 1.11 and it closed on Friday at 1.09. On a possible positive note, the stock rallied 17.5% from the low at the beginning of the week (before giving up most of it at the end of the week) and did it without news, suggesting that there is buying interest here. Daily close resistance is now found at 1.21. A daily close above that level would strongly suggest a bottom is in place. PLNHF generated a negative reversal week, having gone above and below the previous week's trading range and then closing red and in the lower half of the week's trading range, suggesting further downside below last week's low at .78 will be seen this week. The evident downside target is a retest of the 200-day MA, currently at .76, which was the line since Feb 2020 and that got broken 4-weeks ago when the positive fundamental news came out. In addition, there is weekly close support at .75 that strengthens the bulls position but also makes it a target for the traders this week. SCCO generated a positive reversal week, having made a new 11-week intraweek low but then closing green and in the upper half of the week's trading range, suggesting that further upside above last week's high at 76.62 will be seen this week. The bulls did not accomplish much as the green weekly close was only by $.56 cents and the break of the 200-day MA was only by $.96 cents and neither is a convincing statement that the worst is over. On a negative note, the stock did generate a failure signal against the bulls on the monthly closing chart, having closed below the previous all-time high monthly close at 76.83 (closed at 75.29) and that keeps the door open for a drop down to the objective of the short trade at $70. A daily close above 77.94 would negate the negative picture. A daily close below 74.44 would give the short-term edge back to the bears. SNDL generated another red weekly close and closed near the low of the week, suggesting further downside below last week's low at 1.82 will be seen this week. Nonetheless, the action this past week was relatively uneventful as the stock got up within $.02 cents of the previous week's high and closed only $.03 below the previous week's close. The likely objective of this move down is to test the weekly close breakout area (and weekly close support) at 1.76. As such, the action seen is more about fulfilling the chart than anything indicative in favor of the bears. There is also important daily close support at 1.81 that is more likely to hold up than not. Any rally now above last week's high at 2.14 would be a sign that the bulls have the edge again. TCEHY, once again, made a new 10-month intraweek low at 37.89 but did get down to a decent intraweek support area at 37.92 that was seen in March 2022 and from which a rally to 51.78 occurred thereafter. The Chinese market did generate a decent rally on Friday that could be a sign the downside is over. If that is the case, the stock is likely to embark on a recovery rally as well. The stock did generate a red weekly close but did close near the high of the week, suggesting further upside above last week's high at 39.05 will be seen this week. Intraweek resistance is found at 40.12, which if broken, would suggest further upside up to the 200-day MA, currently at 44.06, might occur. Any new low below last week's low at 37.89 would now be a short-term negative sign. TNC generated another red weekly close (the 4th in a row) and closed near the low of the week, suggesting further downside below last week's low at 73.57 will be seen this week. The stock did get down to the 200-day MA, currently at 73.39, on Tuesday and then the bulls attempted to rally from the line with a spike up to 76.11 on Thursday. Nonetheless, that gain was all returned back on Friday, suggesting the bears still have a clear edge. There is decent intraweek support at 72.60 that will be difficult to break but if it does, the 200-week MA, currently at 71.36 will become a magnet. There is also intraweek support at 71.90, suggesting that the 71.40 to 72.60 is an area where strong consideration to taking profits should be given. A rally above 76.11 would now give the bulls a short-term edge. TOL made another new correction low (15-week low) and did close very slightly below the midpoint of the week's trading range, suggesting a slightly higher chance of going below last week's low at 72.57 than above last week's high at 75.49. One negative thing that did happen is that the stock confirmed the failure signal against the bears with a 2nd red weekly close below the previous all-time high weekly close at 74.61 (last 2 week closes at 74.07 and at 73.96). On Friday, the bulls attempted a rally, having made a new 7-day high at 75.49 but then gave up the rally a closed near the low of the day, suggesting the first course of business on Monday will be to the downside. One slightly positive thing that did occur on Friday is that the stock still closed above the previous all-time high monthly close at 72.39 and that keeps the bulls still in control over the longer term. Nonetheless, that same chart does suggest that the stock will go below last month's low at 72.57 and that the 72.39 level will be in play at the end of October. There is no established support below on the weekly or monthly chart. On the daily chart, there is minor support at 71.60 and then at the 200-day MA, currently at 66.83. Evidently, if that line is reached, profits should be taken. To the upside, closure of the down gap at 76.54 would give the bulls a slight short-term edge. VWDRY made a new 11-month intraweek low but then rallied to close near the high of the week, suggesting further upside above last week's high at 7.21 will be seen. The new intraweek low was only by $.03 cents and the bulls failed to get down to the established intraweek support at 6.55 as the low last week was 6.73. This does suggest that there is a fair degree of buying interest here. Any rally above 7.60 would not give the bulls the edge. On the monthly closing chart, there is clear and decent monthly close support at 7.02 and the stock closed on Friday at 7.07. This does suggest there is a fair-to-good chance the worse is over. ZLAB made a new 4-week intraweek and weekly closing low and closed slightly in the lower half of the week's trading range, suggesting a slightly higher chance of going below last week's low at 23.50 than above last week's high at 25.68. Nonetheless, the stock had an inside month and that suggests that at this time, the stock is fairly valued. With the Chinese market having a decent spike up rally on Friday, if that continues it will give the bulls some new ammunition. On the other side of the coin, the bulls were able to hold up the stock while the Chinese market was falling, meaning that it is unlikely the Chinese market will harm the stock but it could help it. Decent intraweek support is found at 22.54. A rally above last week's high at 25.68 would give the bulls enough ammunition for a rally up to at least 27.74. Any rally above 29.64 would mean the bottom is set.
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1) ZLAB - Averaged long at 71.955 (6 mentions). No stop loss at present. Stock closed on Friday at 24.31. 2) ENG - Averaged long at 2.876 (6 mentions). No stop loss at present. Stock closed on Friday at .338. 3) VWDRY - Averaged long at 8.67 (23 mentions). Stop loss at 8.67. Stock closed on Friday at 7.07. 4) 5) TCEHY - Purchased at 43.23. No stop loss at present. Stock closed on Friday at 38.67.
6) CAT - Shorted at 283.04. Stop loss now at 286.70. Stock closed on Friday at 273.00.
7) TNC - Shorted at 83.25. Stop loss now at 78.35. Stock closed on Friday at 74.15.
8) TOL - Shorted at 80.62. Stop loss now at 79.35. Stock closed on Friday at 73.96.
9) DD - Shorted at 77.65. Stop loss at 78.84. Stock closed on Friday at 74.59.
10) SCCO - Shorted at 79.94. Stop loss at 81.46. Stock closed on Friday at 75.29.
11) XOM - Covered shorts at 119.17. Shorted at 118.53. Loss on the trade of $64 per 100 shares.
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The opinions and commentaries by Mr. De Vito are not a recommendation to buy or sell, but rather
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