U.S. Stock Market – Week 29 October – 2 November 2018

** Please note that this is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL PURPOSES only.


Dow Jones Transportation Average rebounded from the CRITICAL support level but with unimpressive volume. It is now bumping against its 11th October low and 61.8% Fibonacci Retracement (red circle), so its recent bounce MAYBE coming to an end soon. It is important to watch where Dow Transports goes from here because it tends to do better than the Industrials at market bottoms (eg. 2009), but drop faster at market tops (eg.2007). On the other hand, Dow Jones Industrial Average bounced off its 29th October low and managed to break above its red 200-day MA line. The downside is that this was also accompanied with declining volume. Going forward, any upside in Dow Industrial will PROBABLY be capped at its 50% Fibonacci Retracement (red circle) or its 16th October high, which is also where its blue 50-day MA line is located.


S&P 500 bounced off its 3rd May support low but the trading volume is waning. The question now is how far can it go? That may be determined by a couple of overhead resistance barriers. The first one is the 61.8% Fibonacci Retracement. Second is its red falling 200-day MA lie (red circle) and the third barrier will be its 17th October high. S&P 500 will need to clear those 3 resistance levels to reverse some of the chart damage suffered during the month of October. The percentage of S&P 500 stocks above 200-day MA has crossed ABOVE the important level of 40% (blue circle), this is a positive sign. However do not too optimistic too quickly as we have seen it drop back below the level a couple of times during the corrections in 2011 and 2015 (red circles). Hopefully, seasonal trends MAY also turn more supportive as we enter the month of November.


NASDAQ rebounded from its 25th April low and broke the steep downtrend line drawn connecting the highs in October. Now it is heading back up to retest its 200-day MA as well as its 50% Fibonacci Retracement (red circle). The next level of resistance will be the high on 17th October (red line). The percentage of Nasdaq stocks above 200-day MA has crossed ABOVE the important level of 30% (blue circle), showing an improvement in the breadth of the tech sector. Word of caution: it has ever rise and then dip back below the level a couple of times during the 2011 and 2015 correction (red circles), so it pays to be to be cautiously optimistic.


IWM (an ETF that tracks Russell 2000 small cap stocks) rebounded from its 2nd April low while its 14-day RSI is also recovering from oversold territory below 30 (top box). It is now heading into the overhead resistance near its 12th October low and 61.8% Fibonacci Retracement (red circle), so the recent rally MAYBE halting soon. Going forward, it is important to observe how IWM perform as it is a leading indicator for larger cap stocks. A pullback is LIKELY and it is the extent of the pullback that will give us a clue regarding the future direction of the larger stocks.

BILLION dollar question: is the 9-year U.S. bull market finally OVER and has the BEAR market arrived?

Our T&Y proprietary stock market indicator is telling me that the PROBABILITY of having a bear market is about 80%. We do NOT have a 100% confirmation yet because some of the fundamental and cyclical indicators still have NOT turned bearish just yet. We will be launching our one-of-a-kind stock market indicator on the 1st January 2019, it is PROBABLY going to be the first stock market indicator in this world that is a composite of Cycle Analysis (CA), Technical Analysis (TA) and Fundamental Analysis (FA) models to provide a holistic dissection of the U.S. stock market. So do watch out for it!

Timing is Everything! 时机就是一切!

** Please note that this is NOT to be regarded as an advice or a recommendation, it is meant for EDUCATIONAL PURPOSES only.

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