Stocks were hit hard, falling 5%, (the full decline from the high is 11%), but recovered some ground at Friday’s close, after reaching the base of the right shoulder in, what will be seen, as a massive H&S top formation, going back to the February 9 low. SPY came within one point (262.29) of touching Weekly Fib support 261.25. The right shoulder now needs some filling. With the 2nd highest volume in 18 weeks, the sell-off appears climactic. Remarkably, while the FAANG stocks were mostly brutalized, The New Economy sector as a whole showed relative strength when compared to the Old Economy, recording a 2 week high. A period of 2 to 5 weeks of choppy, volatile, sideways trading with an upside bias is the likely scenario over the next month, with high days due, on or around November 6 and 23. SPY Fib resistance targets 278.88 – 283.20.
The yellow metal was firm, after testing 1220 support, then bouncing as high as 1243, finally settling 1233. The Bearish Weekly Squat badly damaged the shares, with XAU falling 7.0% (65.17), on a multi-month high in volume, as weak holders bailed out. We’ll look for a Bullish Weekly Squat around Major Fib support 62.95 to start next rally for an eventual break-out through 82.76.
The Dollar traded to a 6 month high (UUP 25.75) as a Bearish Weekly Squat formed, indicating the Dollar should weaken in the near-term. Strong Fib support 24.64. Strong Fib resistance 26.04.