Dow October Fall
Asyou know by now, the Dow dropped 831 points or 3.15% while S&P500 andNasdaq dropped 3.29% and 4.08% respectively. I had anticipated this towards the end of September cautioning everyone to reduce their equity exposure as we headed towards the seasonal treacherous October month. And besides, the US indices especially Nasdaq was long overdue for a pullback.
So will this be a small correction? From thecharts, the S&P500 has a decent support at 2700, a fall to that level isprobable, which means another 85 points roughly 3%. That should not be such aworry unless it crashes below that on heavy volume.So tonight we will know the verdict.
The Dow futures at this point suggests furtherlosses ahead and if you understand the psychology, it is usually “huh…followedby nah….followed by oh no….followed by ok I’m out” (so don’t huh nah and oh no,go straight to ok I’m out or I’m staying).
Onbalance of probability, 2700 will hold and if not 2600 will (6.65% downsidefrom here) …this is not going to evolve to the Big Kahuna just yet-, just aprecursor.
The bigger casualty is likely to be Nasdaq asFAANG stocks start to correct from their lofty valuations and locally, this islikely to impact the Appens, Wisetechs, as well as tech small and microcaps.
Forholders of unloved yesteryear darling tech microcaps, I have said it before, ifyou continue to wait for validation (for the company to prove they can achieverevenue success and business adoption/traction) a long wait will take you intocorrection territory in the global markets.
If you have followed my previous posts, you cangather that the bull rise in US markets were largely contributed by only anarrower range of stocks primarily FAANG so it is artificial. And from the following charts, you can also seethat all the mainstream stories about a strong US and global economy are notsupported by what you see happening with copper, lumber and home builders (XHB)industry.
Sobe wary about views on the robustness of the US and global economy. You can seebelow that all 3 have diverging trends from the S&P500.
