Thursday, November 1, 2018

SPX S&P 500 Monthly Chart; Battle at the 10 and 12-Month MA's Determines the Fate of the Stock Market

The SPX recovers this week which was expected since the entire month of October was a nosedive lower. When the stock market trends in one direction during a month, the last few days typically finish counter trend.

It is all about the 10 and 12-month MA resistance levels at 2759 and 2743, respectively. As the famous Metallica song says, "Nothing Else Matters." The stock market has fallen into a cyclical bear market for the weeks and months to come when the S&P 500 lost the 12-month at 2743. All hope is lost for stock market bulls unless the SPX can regain the 2743 level. The big-time US Monthly Jobs Report drops in 27 hours so the SPX may want to nuzzle up to the 2743 and park itself there until the BLS brings the tablets down from on high tomorrow morning.

Wage growth is more important than the headline jobs number or unemployment rate. If wages rise, inflation will develop in the weeks and months ahead and the Fed will continue the rate hike path higher; much to the chagrin of President Trump. Stocks will likely retreat if the Fed wants to keep hiking rates.

If wages remain stagnant or retreat, the president will have more reason to badger Chairman Powell to slow down his hiking path. If the Fed becomes more dovish, stocks will likely rally. However, if Powell slows the rate hike path in any way, that may cause investors to lose confidence in the central banks. Once credibility is lost in the Fed and other money-printing central banks, the jig is up. The house of cards is already on shaky ground as evidenced by the October stock market crash.

Powell appears dead-set on continuing the gradual hiking path because he wants to build ammunition for the coming recession (he will then cut rates to stimulate the economy when the bad times occur). Perhaps Powell thinks the recession is coming faster than Wall Street expects?

If the SPX fails from the 2743 level, the stock market is toast and the Armageddon path ahead continues with price likely collapsing to the 20-month MA at 2627 for starters. The cyclical bear will growl into next year. If the SPX overtakes the 12-month MA at 2743, the bulls will cheer and a strong relief rally will be verified. Bulls will next need to overtake the 10-month MA at 2759 which will prove that stock market happiness has just kicked into high-gear once again and the bulls will be running higher. If the 10-month is taken out, price will poke up through the 200-day next no problemmo. If the SPX moves higher and fails at the 10-month, however, and then stumbles lower again and loses the 12-month again, the Armageddon path ahead will occur.

Here are the key moving average levels that can be used to gauge the strength or weakness of the stock market going forward. The stock market is in a cyclical bear market below 2743 for the weeks and months ahead.

2846 = 50-day MA
2821 = 100-day MA
2818 = 20-week MA
2784 = 200 EMA on the 60-minute
2777 = 150-day MA
2765 = 200-day MA
2759 = 10-month MA
2751 = 50-week MA
2743 = 12-month MA
SPX is at 2712
2627 = 20-month MA
2581 = 100-week MA

The 2743-2759 gauntlet dictates the fate of the stock market for the months and perhaps many years aheadThis information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 7:30 PM EST Thursday Evening: The SPX continues the upside rally to 2740 with the Monthly Jobs Report on tap tomorrow. The 12-month MA is now at 2751 so this is the key level to watch rather than the 2743 listed above. The circus comes to town tomorrow morning. The drama continues. SPX 2751 determines the fate of the stock market going forward and the bears are currently steering the ship.

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