As we highlighted in last week’s video, two bearish monthly candles warn of a potential top, although whilst prices hold key support bulls are well within their rights to have another crack at the highs. And they may take comfort in the fact that the S&P 500 has closed higher 63.3% of the time in October over the past 30 years, and this bullish bias increases to 73.3% and 76.7% for November and December.
We can see on the S&P 500 daily chart that the gap has nearly closed and (so far) provided support. A potential corrective channel is forming, so bulls could take a break of the descending trendline as a signal prices are headed back towards their highs. Yet given the choppy nature of price action we’re also on guard for a break beneath the support zone. So we’ll continue to monitor S&P 500 stocks for both long and short setups.
Apple (NASDAQ:AAPL) has broken out of compression with a firm close above its retracement line. Two bullish channels remain in play and the stock is now accelerating away from the lower trendline of the internal channel. The 20-day eMA also provided support ahead of yesterday’s breakout.
Netflix (NASDAQ:NFLX) appears to be setting itself up for a dead cat bounce. Since the prior analysis, bears pushed the stock to a fresh YTD low which dragged RSI to oversold, yet price action remains firmly bearish. Yes, a slight bullish divergence with RSI has formed but a momentum low doesn’t always mark a price low. Besides, now prices are consolidating it allows time for RSI to recalibrate. And whilst resistance levels hold, bears aren’t likely to flee.