Volume Analysis | Flash Market Update - 10.17.22

CHIEF TECHNICAL ANALYST, BUFF DORMEIER, CMT

Allow me to tell you about the game I watched this past week between the bulls and the bears. The bears were firmly in control of the game, beginning their drive at the bulls 3639 yard line. They were driving the ball down the field with little resistance from the bulls. Yet the bulls were holding on to a hope. They knew some wildcards would be coming into the game that could change its course and swing the momentum back to them.

Wednesday, the first wildcard, PPI, rushed into the game and quickly joined with the bears. But the Bulls still had one last chance. CPI, a pro bowler, was coming in the game on Thursday. However, CPI joined the bears, too. The bears immediately took control, driving the ball all the way to the goal line. The bears were about to put the game away for good, when suddenly the unexpected happened. The bulls intercepted the ball in the endzone reversing the field by taking the ball all the way back to the bears 3669 yard line. The next play, Friday, the bears pushed the bulls back to the 3583 yard line.  Although the bears are still winning the game this year, often one dramatic play can change the momentum of the game and the eventual outcome. Could Thursday be that play?

For the bulls to neutralize the bears momentum they need to push the bears back to their own 3725. The bulls would then need to advance the ball past SPX 3900 to breakout of bearish territory. A move to 4200 would give the bulls not only control of the ball but momentum to test further levels.

For the bears, Thursday’s action sets up the board. 3685 was the high, 3491 the low for a huge outside day. A close above or below this range could set the stage for the next trend of the market. The SPX closed the week at 3583, a tad under the midpoint of 3588. Next support is 3525. A break below 3490 could take the market near its next major support level of 3400.

Similar to price, volume and capital flows also slightly favored the bears this week. The bears showed 54 billion in outflows whereas the bulls had 38 billion of inflows with capital weighted volume making a new yearly low.

Hang in there my friends. The market may not be completely done retreating yet but there appears to be good reasons for optimism for the patient investor. And always remember, risk management is often the path less taken but the steady course leading towards successful long-term financial outcomes.

101412022 CW $ volume BUFF03
10142022 CW Volume BUFF04
SPX capital flows 10142022

Updated: 10/17/2022

Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. 

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