The SP500 closes with the Three Black Crows candle pattern as breadth weakens. Generally, the Three Black Crows pattern warns of an end to the uptrend. In this case, the pattern reversed all the gains for October. This caused the week’s close to be decisively below the 200-day EMA, a moving average watched by many investors. A close below the 200-day EMA signals that weakness is expected, confirming the warning from the pattern.
The 10-year treasury rate ended the week just below 5%. These are the highest rates seen since July 2007. We will not have to wait long to see how this affects the Fed’s decisions. Their next meeting is on November 1st.
Earnings are in progress but do not appear to be having a positive effect on breadth. Energy is the last sector showing strength but has dropped considerably in the short term. Overall, the SP500 and its accompanying indexes appear weak.
Only the Consumer Staples and Energy sectors saw a positive return for the week, with Consumer Discretionary losing the most.
I expect next week to continue to show weakness as we wait for the Fed meeting the following week. I expect that my trading will be limited as well next week.
I hope everyone has a great weekend!
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