U.S. Stock Indexes See Short-Covering Bounce

Wednesday, October 24--Jim Wyckoff's Morning Web Log

Note: I am out of the office today. My friend and fellow analyst/trader Ken Seehusen is producing my morning report. Ken's style is a bit different than mine, but I think you'll also benefit from Ken's work.--Jim

The STOCK INDEXES

The December NASDAQ 100 was higher due to short covering overnight as it consolidates above the 50% retracement level of the June-September rally crossing at 2657.00. Stochastics and the RSI are diverging but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If December extends the decline off September's high, the 62% retracement level of the June-September rally crossing at 2606.66 is the next downside target. Closes above the 20-day moving average crossing at 2748.06 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 2710.32. Second resistance is the 20-day moving average crossing at 2748.06. First support is the 50% retracement level of the June-September rally crossing at 2757.37. Second support is the 62% retracement level of the June-September rally crossing at 2606.66.

The December S&P 500 index was higher due to short covering overnight as it consolidates some of the decline off last Thursday's high. Facebook whose earnings exceeded analyst's estimates for Mobile ads supported overnight gains. Stochastics and the RSI are diverging but remain bearish signaling that sideways to lower prices are possible near-term. If December extends this month's decline, the 38% retracement level of the June-July rally crossing at 1385.79 is the next downside target. Closes above the 20-day moving average crossing at 1436.81 would temper the near-term bearish outlook. First resistance is the 20-day moving average crossing at 1436.81. Second resistance is last Thursday's high crossing at 1459.50. First support is Tuesday's low crossing at 1402.20. Second support is the 38% retracement level of the June-September rally crossing at 1385.79.

INTEREST RATES

December T-bonds were slightly lower overnight as it consolidates some of the short covering bounce off last week's low. However, stochastics and the RSI have turning bullish hinting that a low might be in or is near. Closes above the 20-day moving average crossing at 148-14 are needed to confirm that a short-term low has been posted. If December renews this month's decline, August's low crossing at 145-23 is the next downside target. First resistance is the 20-day moving average crossing at 148-14. Second resistance is the reaction high crossing at 150-09. First support is last Thursday's low crossing at 146-05. Second support is August's low crossing at 145-23.

ENERGY MARKETS

December crude oil was higher due to short covering overnight as it consolidates some of the decline off last Friday's high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If December extends the decline off September's high, the 75% retracement level of the June-September rally crossing at 84.64 is the next downside target. Closes above the 20-day moving average crossing at 91.11 would confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 91.11. Second resistance is the reaction high crossing at 94.02. First support is Tuesday's low crossing at 85.69. Second support is the 75% retracement level of the June-September rally crossing at 84.64.

CURRENCIES

The December Dollar was higher overnight as it extends the rebound off last week's low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If December extends the aforementioned rebound, this month's high crossing at 80.31 is the next upside target. Closes below last week's low would open the door for a possible test of September's low crossing at 78.72 later this fall. First resistance is this month's high crossing at 80.31. Second resistance is the 38% retracement level of the July-September decline crossing at 80.97. First support is last Wednesday's low crossing at 78.97. Second support is September's low crossing at 78.72.

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