Strong seasonal, bullish pattern into huge data event risk week
This week’s recovery rally in small-cap stocks was highlighted by a bullish reversal pattern on daily charts that rejected new bear market lows. Then the move got a nice little exclamation point with four consecutive higher daily closes – something that hasn’t happened since May. What’s more, we see compelling bottoming potential on daily, weekly and monthly charts at a strong seasonal (October often carves out major market lows). Hopefully, the rally this week wasn’t just a Halloween trick, but the first nice treat into the key holiday season.
In essence, if you were going to script a bottom for this stock market collapse, it would go something like this: breach of a triple bottom in the 650 zone, followed by a dramatic, accelerated, volatile freefall that finds support near other typical recession-era declines, highlighted by a strong bullish reversal formation off the lows and culminating at the end of October – a great historical time of year for a low. Oh yeah – it wouldn’t hurt to see a nice long wick on the monthly candlestick either. Well, that’s exactly what we’re starting at heading into November (goodbye October, go ahead and let the door smack you on the way out!).
Another important element moving into play this week is that the market will have to navigate through a series of major calendar event risks, culminating with the monthly employment release on Friday. If the stock market can sustain upside momentum from this week’s action through all those risk events this coming week, then it would add psychological punch and help build on the bottoming foundation.
It will be critical for the Russell to convert 500 into support; another breach of that point – especially on a weekly closing basis – would damage the bottoming patterns currently in play. Since we have some compelling arguments for a low in here, it’s time to think about Fibonacci retracement targets for a bounce. I have decided . . .
In essence, if you were going to script a bottom for this stock market collapse, it would go something like this: breach of a triple bottom in the 650 zone, followed by a dramatic, accelerated, volatile freefall that finds support near other typical recession-era declines, highlighted by a strong bullish reversal formation off the lows and culminating at the end of October – a great historical time of year for a low. Oh yeah – it wouldn’t hurt to see a nice long wick on the monthly candlestick either. Well, that’s exactly what we’re starting at heading into November (goodbye October, go ahead and let the door smack you on the way out!).
Another important element moving into play this week is that the market will have to navigate through a series of major calendar event risks, culminating with the monthly employment release on Friday. If the stock market can sustain upside momentum from this week’s action through all those risk events this coming week, then it would add psychological punch and help build on the bottoming foundation.
It will be critical for the Russell to convert 500 into support; another breach of that point – especially on a weekly closing basis – would damage the bottoming patterns currently in play. Since we have some compelling arguments for a low in here, it’s time to think about Fibonacci retracement targets for a bounce. I have decided . . .
For access to the full article, you must be a registered member - it's FREE.
Already a member? Please log in below
Not Registered?
Register today and enjoy all that SmallCapInvestor.com has to offer, including:
- Daily small cap stock profiles.
- Intra-day coverage of Russell 2000 companies.
- Research and insights from our analysts.
- Special reports.
