Stock Market Analysis November 3 2023

Market Analysis: A Recap of the Week’s Surprising Move

Hey everybody, it’s Brian Shannon from alphatrends.net. Today is Friday, the 3rd of November 2023, and we had a huge move in the market this week. I, for one, didn’t expect it. We did come down to the anchored volume weighted average price from the 2022 low and closed just below it on Friday. But from the start on Monday, we gapped higher and then never looked back. It was a pattern of higher highs and higher lows. I was a little reluctant to accept that we were going to definitely have this type of rally because that 5-day moving average was still declining, as you know, that’s one of my primary intermediate-term gauges. So by the time the FED came around and we were up in this area, I thought it was a little bit stretched. I was able to squeeze some money out of it, but I, for one, definitely underperformed this week.

The NASDAQ was up greater than 6%, with the Russell 2000 up 7.5% and biotechs up 11% this week. So again, just a monster move, mainly from places where we’ve seen underperformance. Now that we’ve had this big move, what’s next? Just because we might have missed a move or missed out on the bigger opportunity to make all that big headline money doesn’t mean there won’t be opportunities in the next week ahead.

What’s Next for the S&P 500?

Right now, the S&P 500 today came up to the anchored volume weighted average price from the year-to-date high. So, is that going to be resistance? Well, as you know, I always talk about levels of potential support and potential resistance. I refer to them as levels of interest. Just because we’re at this level doesn’t mean I want to sell it short, and I don’t necessarily want to short a pullback because we’ll still be above a rising 5-day moving average. So let’s say we do something like this into next week and then we see a sharp selloff. Maybe a little bit weaker, that 5-day moving average comes back up, and then we’ll look for some reemergence of strength. We’ll put an anchor off of this, perhaps. That’s how it comes together.

Going back to the inverted Head and Shoulders pattern we spoke about a week or so ago, if we break above that level, people will say, “Hey, it’s going to close the gap.” A gap closure would be a perfect place for this market to then begin to sell off and reload for the next move up. The thing is, it’s okay to miss moves as long as you’re not positioned short during something like this and adding to short positions. That’s where the real damage gets done. To be on the sidelines or to be involved in a smaller way, you can’t beat yourself up for that. No one gets all the moves all the time.

What’s Happening with the NASDAQ?

The NASDAQ also had a monster move. It blasted past the 20-day moving average, the 50-day moving average, and the anchored VWAP from that prior peak. It’s up through the anchor from this year’s high as well. These things aren’t useless; you can’t look at it that way. The proper way to use a moving average or an anchored VWAP is not to take action at that level, but instead to say, “I’m going to really get more focused, more interested at that level.”

So yesterday, when we closed just below that 50-day moving average, the trend was clearly still higher. I had drawn this line in saying this is a potential level of resistance. It had been resistance here, support here, potentially resistance again. But the market gapped up today, and I always say only a fool would get short there because it’s a potential level, not a real level. We only know support after the fact. That’s what I’ve been saying the last couple of weeks. Now we only know resistance after the fact. So we look at it and say, “What has been important to this market before?” Well, we had this high, a lower high, a lower high, and a lower high would come in right here. We also have a great bounce, but it’s a bounce in a downtrend. What’s the definition of a downtrend? Lower highs and lower lows. That’s what we have in the NASDAQ, that’s what we have in the S&P 500. It doesn’t mean it can’t turn around, but we have lower highs and lower lows in these markets. That’s one timeframe’s definition.

If you look at the shorter-term timeframe, we have a beautiful clear pattern right in here of higher highs and higher lows. What we want is for those to be in alignment. Maybe the NASDAQ starts to pull back like this and then in a week or two’s time, we build some energy and bust through that level. That would be my preferred scenario. I’m going to trade what unfolds in front of me. I know that it’s great to see that most people say, “Well, the market can’t survive if Apple’s going down.” Apple reported earnings, and their stock sold off, but guess what? It didn’t sell down the market at all. It’s a market of stocks, and often times a big one will have an impact.

What’s Happening with Other Sectors?

Semiconductors came down a lot, and a lot of people say, “Well, they found buyers at the 200-day moving average.” Did they find buyers at the 200-day moving average, or did they find buyers and bottom at the year-to-date anchor? I don’t really care which one you choose to believe, but I will say this: earlier this year, the 200-day moving average for most of the year has been completely irrelevant to what’s been happening in the semiconductors. But if you look at the anchored VWAP from the beginning of the year, that has been much more important. I put more emphasis on the volume-weighted average price than I do the 200-day moving average, and I think this is a great way to see that right here in this market.

The energy stocks continue to find buyers at this horizontal area at $85. That was the year-to-date anchor and the 200-day moving average, and it still is. This is an important level going forward if you want to be long, expecting maybe oil’s going to rally. It’s clear to know where your risk is if you’re an investor. Your stop probably goes underneath these two lows.

What’s the Takeaway?

The market had a surprising move this week, with significant gains across various sectors. While some traders may have missed out on the opportunity, it’s important to remember that not every move can be captured. Following a process or system that aligns with your risk management parameters is crucial.

It’s essential to analyze the market based on different timeframes and indicators. While the market may show signs of an uptrend on the shorter-term timeframe, it’s important to consider the overall trend and potential resistance levels. Being aware of potential scenarios and having a low-risk strategy in place can help navigate the market effectively.

Remember, it’s okay to miss moves as long as you’re not positioned in a way that adds to potential losses. Avoid comparing yourself to others on social media and focus on your own trading strategy. Following technical analysis and understanding the flow of money in the market can provide valuable insights for decision-making.

Frequently Asked Questions

1. What was the market’s performance this week?

The market had a significant move this week, with the S&P 500 up close to 6%, the NASDAQ up greater than 6%, and the Russell 2000 up 7.5%. Biotechs also saw a massive 11% gain.

2. What are the potential resistance levels for the S&P 500?

The S&P 500 has reached the anchored volume weighted average price from the year-to-date high, which could potentially act as resistance. However, it’s important to note that levels of interest should be observed rather than taken as definitive resistance levels.

3. How should I approach the current market trend?

While the market has shown a pattern of higher highs and higher lows, it’s important to consider the overall trend. Currently, the NASDAQ and S&P 500 are still in a downtrend, characterized by lower highs and lower lows. It’s crucial to trade what unfolds in front of you and have a clear risk management strategy in place.

4. What indicators should I focus on for the semiconductors sector?

Instead of relying solely on the 200-day moving average, it’s important to consider the anchored volume weighted average price from the beginning of the year. This indicator has shown more relevance in the semiconductors market. Paying attention to volume-weighted average price can provide valuable insights for decision-making.

5. How can I navigate the energy stocks market?

The energy stocks have found buyers at the horizontal area around $85, which coincides with the year-to-date anchor and the 200-day moving average. This level is crucial for long positions, and setting a stop-loss below the recent lows can help manage risk effectively.