The world is in a serious mess, and a lot of folks want to ignore the news of war that dominates all forms of media. Slipping away to a bunker in the mountains is a practical option if you have it. Otherwise, be sure to have your financial house in order, a full pantry of non-perishable food that would make a prepper smile, a stash of gold and silver precious metals, cash on hand, and plenty of self-defense paraphernalia so you can hunker down at the home you are living in and fend off the crazies, savvies.

Lacy Hunt was spot-on as usual when he advised us to brace for a credit crisis and recession because we are facing a perfect storm of “economic deterioration.” Lacy’s two-part interview can be viewed at my late summer technical analysis. James Howard Kunstler summed up the situation yesterday, and here is an excerpt:

Chomp Chomp, Gulp Gulp… “Of course, you realize that if this tragic business in the Middle East gets out of hand millions of people might die, maybe even you and me. Any way you cut it, looks like Islam wants to rumble… If we manage to avoid WW3, America has its own grave problem to consider, which is comprehensive collapse — of economic activity, the financial scaffold for it, and of civil order in a society under deadly stress. Most of this damage has been induced by our own political leaders.” – Kunstler’s Clusterfuck Nation, Oct. 27

Let’s move on to the Dow, S&P 500, Nasdaq 100, and Russell 2000 charts to see what’s happened since mid-August. Keep in mind that if and when the Federal Reserve returns to full-blown quantitative easing (QE) or another dovish mode as the latest #TaperCaper unfolds, liquidity injected into the recessionary West could rally stock markets until the global debt endgame plays out. The next FOMC monetary policy announcement is slated for next week. Note that technical analysis with a weekly candlestick chart focuses on potential near-term (a few weeks) trading opportunities for short-term swings or intraday scalps. To view a larger version of any chart below, mouse over it and select or right-click it and choose a “view image” option.

$DJI Dow Jones Industrial Index weekly chart as of Oct. 27, 2023 Close…

Excerpt from the Dec. 29, 2022 weekly chart analysis:

“Following Jay Powell’s Fedspeak during his Dec. FOMC monetary policy announcement, support was found at the 50 Exponential Moving Average (EMA), the Descending Broadening Wedge’s topside trendline, and the 23.6% Fibonacci… This week’s candlestick is an indecisive Rickshaw Man… The DMI-ADX is transitioning and may trend bearish, the StochRSI is overbought and threatens to rollover, and buy Volume trended downward into the rally off an Adam & Adam Double Bottom (see daily chart) that’s indicative of more downside or consolidation… seasonality and economic indicators suggest downside into early 2023… The chart is neutral and a scalping environment for professional traders.”

Excerpt from the Mar. 6, 2023 weekly chart analysis:

“The Dow has not made a new high since mid-December’s Plunger Candle (aka Shooting Star) close. The current price action is choppy and remains above the Descending Broadening Wedge’s topside trendline and 23.6% Fibonacci while riding along the 50 EMA…  and a price plunge followed three indecisive Spinning Tops (aka Long Legged Doji) in the first half of February… The chart remains neutral and a scalping environment for professional traders. Upcoming economic news, geopolitical developments, and the Fed’s FOMC policy decision on the spring equinox will all determine the near-term direction of all market indices.”

Excerpt from the Aug. 16, 2023 (Twitter thread) weekly chart analysis:

“The price action formed a bullish Inverted Head ‘n Shoulders pattern… its Neckline was taken out in mid-July and a Throwback is testing support… If that support fails, the next levels are the red trendline drawn up from the Oct. 2022, 50 EMA, Fibonacci Confluence at the 23.6% level, and the 31,430 low from March… DMI-ADX is fading from the Alligator Tongue power-trend setup, the StochRSI is rolling over, and Volumes are steady… Despite the upside price action since May, the chart is neutral. Keep a close eye on that red trendline.”

The Dow printed a 36,953 high in Jan. 2022 and plunged 22.5% to the 28,661 low in Oct. 2022, then rallied to a high of 35,679 in Jul. 2023 and printed a low of 32,418 this past Friday, which is -14% off the 2022 high. I emphasized in August to keep a close eye on that red trendline drawn up from the fall 2022 Double Bottom. The downside price action already breached the first two levels of support (red trendline and 50 EMA), closed at the 23.6% Fibonacci Confluence on Friday, and is threatening a plunge to the mid-March low of around 31,430. With current economic issues and a world on the cusp of a multi-regional war, it is possible the Dow plunges to the next Fibonacci Confluence level at around 29,500-29,800. That kind of move eliminates all gains made since the 1Q20 pre-pandemic high. The DMI-ADX is on the verge of a negative power-trend setup and sell Volumes have been steady and high with a falling price. The chart is bearish.

$SPX S&P 500 Index weekly chart as of Oct. 27, 2023 Close…

Excerpt from the Dec. 29, 2022 weekly chart analysis:

“The Plunger Candle has a long wick that printed another 4,101 high, and its low bottomed at 3,828 following Jay Powell’s FOMC announcement… If the price action remains above the 38.2% Fibonacci level and consolidates, a rally might resume. The chart is neutral and a scalping environment for professional traders.” 

Excerpt from the Mar. 6, 2023 weekly chart analysis:

“The SPX consolidated through first week of January, rallied off the 38.2% Fibonacci, then breached the Descending Broadening Wedge’s topside trendline and 50 EMA… followed by two Spinning Tops in mid-February and briefly fell back below the 50 EMA… Today’s price action closed above the 50 EMA. The red trendlines draw attention to a possible Rising Wedge that is not bullish if it continues. Support rests at the lower red trendline…  Resistance is at the Fibonacci Confluence at 23.6% near 4,200… The chart is neutral and a scalping environment for professional traders.”

Excerpt from the Aug. 16, 2023 weekly chart analysis:

“The Rising Wedge morphed into an Up Channel (red) and tapped the topside trendline of the wider Up Channel (black dotted lines) drawn from the March low. The price action got ahead of itself in July, printed a Plunger Candle, then hit resistance around 4,600… and rolled over. The lower trendline of the red Up Channel was breached to the downside this week, and sell Volume might match the previous two weeks. Support is clear at the 23.6% Fibonacci Confluence and 50 EMA. Below those levels we could see a price plunge if 4,000 is breached on a sell Volume surge… Due to a breach below the red Up Channel, the chart is bearish in the near-term and a scalping environment for professional traders.”

The S&P 500 printed a 4,819 high in Jan. 2022 and plunged 26.5% to the 3,492 low in Oct. 2022, then rallied to a high of 4,607 in Jul. 2023 and printed a low of 4,104 this past Friday, which is -15% off the 2022 high. The price action in late August was a Dead Cat Bounce, and the rising sell Volume forced a price fall to the 50 EMA. There were three weeks of consolidation before the 50 EMA, Fibonacci Confluence, and lower trendline of the wider Up Channel were breached to the downside. The next levels of support are the Mar. 2020 trendline and 38.2% Fibonacci Confluence at around 3,800. If selling continues beyond those levels, the S&P could face the same fate as the Dow if all gains since the 1Q20 highs are wiped out. That level is 3,400-3,500 for the S&P. The DMI-ADX is on the verge of a negative power-trend setup, and sell Volumes are rising with a falling price. The chart is bearish.

 

$NDX Nasdaq 100 E-Mini Futures weekly chart as of Oct. 27, 2023 Close…

Excerpt from the Mar. 6, 2023 weekly chart analysis:

“The NDX consolidated during the first week of January and then rallied above the Descending Broadening Wedge’s topside trendline and 50 EMA… Momentum did not follow through and the price is stuck on the 50 EMA. Near-term support rests at the 50% Fibonacci, and overhead resistance is clear at the 38.2% Fibonacci. The DMI-ADX is positive but indecisive… and Volume is steady. The chart remains neutral and a scalping environment for professional traders.” 

Excerpt from the May 31, 2023 weekly chart analysis: 

“Consolidation took place for four weeks beginning in late February through early March before breaking above the 50 EMA. A subsequent rally to the 38.2% Fibonacci level occurred on falling buy volume, which led to a second consolidation through April on steady buy volume… The DMI-ADX indicates a strong uptrend is intact… If the price action breaks out on strong buy Volume above the 23.6% Fibonacci, there is not much resistance until the January and March 2022 highs fat around 15,280… Despite the recent rally, the chart is neutral and a scalping environment for professional traders.”

Excerpt from the Aug. 16, 2023 weekly chart analysis:

“The artificial intelligence/chatbot news sparked a rally in a handful of tech stocks that spiked the Nasdaq to a 16,063 high and a Plunger Candle four weeks ago. That rally morphed into an extended and overbought Up Channel (red). The price action is sitting precariously on the lower trendline of the red Up Channel… Support is at the 23.6% Fibonacci, 50 EMA, the red hyphened horizontal line drawn from August 2022 to May 2023… The DMI-ADX is rolling over, the StochRSI has collapsed, and sell Volume is strong and steady. The chart is bearish if the price action takes out the red Up Channel’s lower trendline.”

The Nasdaq printed a 16,767 high in Nov. 2021 and plunged 37.5% to the 10,485 low in Oct. 2022, then rallied to a high of 4,607 in Jul. 2023 and printed a low of 14,140 this past Friday, which is -15.5% off the 2021 high. The price action since mid-August has chopped downward with the A.I. mania deflating. A bullish Half Staff Flag has formed since the mid-July high, but I am not convinced that we are going to see a significant rally that leaves it behind. The price action settled on Friday at the 23.6% Fibonacci and 50 EMA where a second tap set the lower trendline for a Flag. I suspect the Nasdaq will continue lower as sell Volume has been rising while the price is falling, and the DMI-ADX is indecisive but leaning negative. Minor support going forward is the red-dashed lateral at around 13,600, the 38.2% Fibonacci level at around 12,900, and if the price plunges further, the 2020 trendline is next. The chart is neutral. If the 50 EMA is breached on strong sell Volume next week, then it is bearish.

$RUT Russell 2000 E-Mini Futures weekly chart as of Oct. 27, 2023 Close…

Excerpt from the Dec. 29, 2022 weekly chart analysis:

“Further downside price action could probe the 50% Fibonacci level or 1,640 support at the Adam & Eve Double Bottom.”

Excerpt from the Mar. 6, 2023 weekly chart analysis:

“Despite the rally and flagging pattern, the chart remains bearish to neutral and a scalping environment for professional traders.”

Excerpt from the Aug. 16, 2023 weekly chart analysis:

“The Russell is the only index priced to reality vs. the Borg-infested stock market algorithms amid Bidenomics hopium. As suspected, the Flag pattern failed, and the price action plunged to create a second tap on a new lower trendline that formed an Ascending Triangle that could be bullish, but bullishness is an unlikely outcome at this time… The price is precariously sitting on the 50 EMA and the next support level is the Ascending Triangle’s lower trendline and 50% Fibonacci level… The chart is bearish in the near term and a scalping environment for professional traders.”

The Russell printed a 2,461 high in Nov. 2021 and plunged 37.5% to the 1,641 low in Jun. 2022, then rallied to a high of 2,033 in Aug. 2022 and printed a low of 1,639 this past Friday, which is -33% off the 2022 high. The lower trendline of the Ascending Triangle was breached on increasing sell Volume, as well as the 50% Fibonacci level. The lower trendline of the Ascending Triangle was breached on increasing sell Volume, as well as the 50% Fibonacci level. If the 1,640 lateral is taken out and the price action plunges, a Measured Move Down pattern is confirmed. The current level has a lot of support going back to mid-2018, but current events have the power to punish the Russell. The chart is bearish.

Let’s close shop tonight with links to a few news items that influenced markets since mid-August and must-listen-to interviews with Leon Cooperman and Michael Pento released over the weekend.

• The skeptical case on generative AI – Financial Times
• Wall Street is declaring victory too early – Business Insider
• Bull… or Bear? – Capitalist Exploits
• AI-driven stock-market rally pulls back in August, what’s next – MarketWatch
• Market Crash – Bankruptcies Threaten to Sink S&P 500 – Business Insider
• AI Fantasy Fades as Markets Reel From Real-World Rate Jump – Bloomberg
• SEC: Financial Crash Caused by AI ‘Nearly Unavoidable’ – VICE
• The United States Deficit Road to Ruin – Daniel Lacalle
• Business Activity Gains Momentum as US Inflation Gauges Cool – Bloomberg
• Bill Ackman covers Treasury bond shorts, too much risk in world – CNBC
• World’s Oldest Central Bank Seeks $7 Billion Bailout – Riksbank Sweden
• Ackman-Pumped Rally Fades, Traders Piling Into Treasury Shorts – Bloomberg
• Israel-Hamas war could brink global recession and depress stocks – Fortune
• Escalation in Israel-Hamas war could plunge U.S. into recession – ABC News

Leon Cooperman: Hedge fund billionaire issues warning – Fox Business, Oct. 28

 

Stagflation or Depression after market crash in 2024? – WTFinance Interview w/Michael Pento, Oct. 26

Plan Your Trade, Trade Your Plan

TraderStef on Twitter, Gettr / Website: TraderStef.com