Aside from the autumn colors, everything is green on Wall Street. Stocks are up almost everywhere you look. There is only one broad market index that could reasonably be interpreted as being bearish.
The Dow Jones, S&P 500 and Nasdaq are at new (all-time) highs, and it takes a permabear or nit-picky glass half empty kind of a person to find anything alarming in those charts.
Perhaps the most bearish looking chart is that of the NYSE Composite Index (NYA). The NYA measures the performance of all common stocks listed on the New York Stock Exchange (NYSE). There are currently 1867. The iShares NYC Composite ETF (NYSEArca: NYC) replicates the performance of the NYA.
Unlike the Dow Jones and S&P 500, the NYA also includes small cap stocks, which explains why the NYA is lagging.
In fact, the NYA chart gives hope to all those who missed the latest rally. Why?
The NYA is bumping up against a serious resistance cluster made up of:
- 78.6% Fibonacci resistance
- Trend line resistance
- Prior support shelf
In addition, (bearish) Elliott Wave aficionados may be quick to point out that the NYA’s decline from the September high to the October low could be counted as five waves. Such a 5-wave move would suggest at least one more leg lower.
The overall strength of the “October blast” rally suggests that NYA will eventually surpass this resistance cluster. But if NYA is going to pull back and fill some of the open chart gaps, right about now (or at 10,850 – 10,900) seems like an appropriate time to do so.
The Dow Jones is also about to run into the same resistance level that caused the September correction.
Solid resistance levels, like the ones shown above, increase the risk of a pullback, but obviously don’t guarantee said pullback. Higher targets are unlocked if the NYA and Dow Jones sustain trade above resistance.
A detailed forecast for the remainder of the year – based on an analysis of seasonality, sentiment, technical indicators and historical patterns – is available in the November 2 Profit Radar Report.
Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.
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