Available Insights: U.S. Stock Market Review (10-14/11)

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"}, "type": "paragraph"}, {"id": "u94vru6r", "data": {"text": ""The S&P 500 index fell ... this is the 26th decline of more than 1% in 2025. Such behavior is normal: on average, a year sees 29 drops of more than 1% in a day.\n\n\n\nWhat was abnormal was the vertical rise over the past 7 months without any serious pullbacks".\n\n\n\nCharlie Bilello", "author": ""}, "type": "quote"}, {"id": "voxzzw1g", "data": {"html": "

Hello again.

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In the outgoing week, speculators did some solid work. The positive mood on Wall Street, which prevailed in the first half of the week, had completely disappeared by Thursday, and quotes returned to Monday's opening levels.

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In the first half of the week, only the Dow updated its all-time high, while other futures showed a proper model of short protection within balance. The reason is that the Dow Jones index has no tilt toward tech giants, whereas in the same S&P 500 their share reaches 30%. And they have obvious problems.

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The positive mood was built on news that the shutdown everyone was tired of would soon end. Just before that, decent liquidity had been accumulated at local lows, which I discussed in the previous review. In addition, Trump's representatives at the Fed intensified verbal interventions: tight monetary policy is very bad for the economy, and cutting rates in December by at least 50% is necessary. On the other hand, according to New York Fed data, inflation expectations remain high, which does not support a sharp easing of monetary policy.

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All investors agree that the U.S. market is expensive now, which means it is better to keep more liquidity in cash. This is exactly how the press explains the sharp reversal in stock markets from the week's highs: investors were actively exiting Nvidia (-3.7%), Alphabet (-2.9%), Amazon (-2.7%), Microsoft (-1.5%), Oracle (-4.1%), and Tesla (-6.6%). There is one reason: a large volume of statistical data was released.

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On Friday the decline continued, although it was actively bought up, as discussed below. The decline is also explained by statements from Fed officials about an increased probability of a rate cut in December.

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According to the FedWatch Tool, from Thursday to Friday expectations for another 0.25% cut fell from 66.9% to 44.4%. I should note that a month ago 94.2% of market participants expected a rate cut. Over the month, expectations that the rate would be kept unchanged rose from 5.7% to 55.6%. Thus, there is some uncertainty in the market regarding the Fed's actions. But this uncertainty reflects the uncertainty of signals from the Fed itself. In any case, there are still three weeks before the Fed meeting, during which much can change.

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Last week opened with a gap. This means that the marked liquidity in the 6735-6764 range acted at that moment as a zone of aggressive buying before the news, as I wrote in the previous review. The quote was dragged beyond the ranges I expected, but within the balance (consolidation) in the current wide corridor.

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Shorts were built on Tuesday-Wednesday in the 6870-6880 range, i.e. where sellers had worked before. The hit on shorts came on Thursday: amid high volatility and corresponding speculative intraday volumes, on Friday they reached last Friday's lows and returned to last week's close. As a result, on Thursday and Friday the main liquidity was rotated in the 6755-6768 range.

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Expectations for next week are mixed. Much depends on the real attitude of large participants. Market liquidity is passing through, which means they may well hold 6700. We will watch 6808-6814 and 6853-6864 speculatively for protection. The second range is more important.

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Overall, I expect activity in the 6750-6850 range, with tails reaching 6870-6900 and not below 6690. The market is not giving a clear signal yet, which means we continue working within balance and looking for shorts at highs and buys at lows.

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On Nasdaq, shorts were built from Monday through Wednesday inclusive in the 25520-25670 range, after which last week's lows were updated. It is worth noting that this is not only protection of last week's sales, but also trading through the gap (imbalance) from the week before last.

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At the same time, a reversal volume was thrown in locally around 25790. There is not much of it, but it is visible even on the daily chart.

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In addition, do not forget to watch the 25870-26060 range. Within the current game we have nothing to do there, but nobody canceled speculation.

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The plan for the week overall implies a decrease in volatility and volume accumulation in the 24880-25350 range. Speculative tails may be below Friday's bottom. But if volume accumulation starts in the area below 24700, then it is worth thinking about not getting caught in a very expensive buy.

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On this instrument, speculators again updated the all-time high. If we talk about the volume accumulation model, then the Dow generally likes exactly this model on all timeframes: from intrahour trading to intraweek trading. It consists of updating an extreme with volume accumulations that may be assessed as continuation volumes, but in the end turn out to be reversal ones.

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Generally speaking, the short was built in the 48230-48450 range with a sharp reversal strike and updates of the week's lows. The price was stopped around 47200-47400, i.e. slightly above last week's buying zone. If they do not press hard below 47000, and especially 46700, then YM has every chance to see the quote somewhere around 47680-47750. But it is unlikely to consolidate higher.

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Overall, next week I expect balance (consolidation): a decrease in trading volumes and volatility. I am not ready to consider alternative scenarios yet, since quotes are in a wide balance at all-time highs, volumes are growing, but there is no range expansion and, in my opinion, none is expected. However, there is activity in the medium-term demand zone.

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A confident expansion from the balance with a shift in weekly balances implies:

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I will note separately that inside balances on the daily timeframe it is very interesting to trade countertrend deals from the borders lasting 1-2 days. The main thing is not to make a mistake and to follow capital management rules.

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Respectfully, Ivan Rusin

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