Mid-Month Update & Outlook: October Strikes Again
By: Jeffrey A. Hirsch
October 17, 2019
Our Best Six Months MACD Buy Signal that triggered last Friday, October 11th, initially appears to be timely. Friday’s Alert detailed several trades that were deployed Monday and updated in a follow up Alert on Monday. In addition to the Seasonal Sector ETF trades and the Tactical Seasonal Switching Strategy Portfolio trades in DIA, SPY, QQQ and IWM we are releasing a New October Stock Basket today!
As you can see in the chart below of the S&P 500 the MACD “Buy” indicator trigger in the lower pane, highlighted in the yellow box with the black arrow, came in strong below the zero line. In the upper pane resistance at 3010 still persists. Aside from this resistance technically things look encouraging. We held support last August above 2815 and have been making higher lows since then, riding the 200-day moving average higher. The 50-day moving average has also constructively turned higher.
I have also updated the Pulse of the Market below. Monday’s DJIA gain (1) on top of Friday’s 1.2% gain shows continuing market support after the trade-news driven gain Friday. Tech-stock support was also prevalent in NASDAQ’s 0.9% gain last week (2). 
Market breadth picked up a tad last week (3) with NYSE Advancers outpacing Decliners by a slim 369. New Highs raised just a hair as did New Lows (4). Market internals currently leave something to be desired. Further gains in Advancers and Highs and a reduction in Decliners and Lows are needed to confirm broad market support and further gains. 
Weekly CBOE Equity Only Put/Call Ratio of 0.73 (5) matched some of the recent spikes at the lows in May and August, which is encouraging. Finally, the yield curve continues to steepen with the current spread between the 90-Day and 30-Year Treasury now at 44 basis points, its widest margin since August. 
As we have been monitoring all year, seasonal patterns for the Pre-Election remain on track, though the October dip came early. Save some truly negative news, the low for the year is likely in. With the market tracking this seasonal pattern so closely all year that suggests the pattern is likely to continue, which means some backing and filing around S&P 3000 through late November before additional new highs toward yearend. 
[Pre-Election Year Seasonal Patterns]