Technically Speaking For October 30

Includes: IWM, QQQ, SPY
by: Hale Stewart


The EU economy is slowing a bit.

Consumer sentiment regarding housing and auto purchases is declining.

The indexes are trying to turn bullish on their respective shorter charts, but just aren't there yet.

The EU is the second largest economic region in the world. Right now, its economic numbers are slowing. Both the business climate and economic sentiment indicators have declined since the first of the year. Retail trade sentiment dropped sharply in the latest report-a worrying development this close to the Christmas season. The ETF that tracks the EU region is currently below the 200-week EMA:

The index is down 17.6% in the latest selloff, placing it firmly in correction territory. Today’s GDP report was disappointing: thanks to a slowdown in Italy, it was up 0.2% Q/Q and 1.7% Y/Y. On the good side, the ECB continues to state publicly it will maintain low interest rates through at least mid-2019. It appears this policy will be necessary for the foreseeable future.

The following two charts were highlighted by David Rosenberg on his Twitter feed:

The top chart shows consumer sentiment about purchasing a house; the bottom chart shows the data for purchasing a vehicle. These are two of the largest consumer purchases. Here is Rosenberg's accompanying commentary:

There really isn't a meaningful counter-argument to his analysis. If he's correct, it means we can expect weaker durable good purchase numbers going forward.

S&P has stated that if there is no Brexit deal, they will lower the UK's credit rating. They also stated a recession would result. After S&P's complicity in the GFC they've lost a tremendous amount of respect on my part. However, I completely agree with their statement that no deal will cause a recession. I also think this is the biggest risk to the glocal economy over the next 6-9 months because of the very high potential for unintended consequences.

Let's take a look at today's performance table:

Finally -- an up day. All of the major averages had solid advances. The IWM and IJH led the pack, indicating that traders were willing to take on more risk today -- or that they believed both were oversold. However, even the SPYs had solid gains, which we haven't seen for awhile.

Remember that in the shorter time frames -- the 5-day and 30-day charts -- we've seen a lot of bearishness. The biggest issue has been a continued solid downtrend in both charts along with longer periods of lower lows and lower highs.

Let's see if the averages have moved away from that, starting with the SPY and QQQ:

Despite the solid gains today, the answer is no -- both the SPY and QQQ have maintained their respective bearish trends.

The IWM is a different story. Over the last five days, it has moved sideways, trading between the 144.5 and 150 levels. We could consider this a potential bottom -- but we won't know the answer to that until prices move through resistance.

Next let's look at the 30-minute charts, starting with the SPYs:

The general downtrend is still in place. But at today's close, prices moved ever so slightly above resistance on decent volume.

The QQQ, however, remains in a solid downtrend.

The IWM's potential bottoming is clearer on this chart.

Despite the solid performance today, we need at least one more day of gains to argue that we've seen a turnaround in the averages.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.