Market Update & Review

As we will discuss, the conflict with Israel took center stage this past week. However, the markets also had to deal with PPI, CPI, and the official kick-off of earnings season. From a market trading update perspective, let's start with a review from last week. To wit:

"The market failed to hold that initial support level and quickly tested the 200-DMA as expected. The good news is the market bounced sharply off support levels on Friday, reducing the MACD 'sell signal.' If the market can follow through on this rally early next week, we could see a 'buy signal' triggered."

As shown, that happened as stocks pushed higher, triggering the MACD "buy signal." As we will discuss below, that trigger also signals the start of the "seasonally strong" period of the year. The market did run into resistance at the 50- and 100-DMA but continues to hold above short-term support at the 20-DMA. With the market not yet overbought, we could see some consolidation at these levels into next week before another attempt at resistance.

(Click on image to enlarge)

The attempt at resistance will mostly depend on earnings reports as they get underway in earnest next week. As discussed below, the bar has been lowered substantially from last year, so we should expect a high "beat rate" of earnings. The key, however, will be forward guidance that leads to concerns about a slower economy next year.

We will be watching those reports closely.

While many concerns relate to this latest conflict in the Middle East, the market continues to act bullishly for now. The summer correction remained within the confines of seasonal weakness, and the rally off of support, as noted, keeps the market's bullish trend intact for now.

Use short-term declines to add to equity exposure as needed, but continue to manage risk as we head into year-end.

More By This Author: