Bernie Schaeffer Research 10-27-2018

There wer many headlines this past Wednesday, Oct. 24, covered the Nasdaq Composite’s (IXIC) close in formal “correction” territory, down more than 10% from the all-time high it had reached as recently as Aug. 30.  Less attention was paid that the Nasdaq’s less-flashy cousin, the NYSE Composite Index (NYA), also closed in correction territory that same session.

Asteroid Abbreviations on the chart:  Hid is Hidalgo, His is Hispania, Mex is Mexico and Geo is George as a proxy for America via her founding father, George Washington.october 24 nyse close.png

And 12,000 wasn’t the only technical barrier that NYA sliced through on its way down. The accompanying weekly chart shows that formerly reliable 2018 support at the 50-week moving average was broken during the second week of October, but the index found a backstop in the form of its 80-week trendline.
The round 12,400 area — a former layer of resistance in late 2017 is now the 80-week moving average that has supported the NYA through two Friday closes before giving way to last week’s widespread panic.
Back in early November 2016, there was a one-week breach of the 80-week moving average by NYA. That break was caught by the 200-week trendline, which at the time was in the vicinity, and the index’s speedy recovery was aided by a bullish momentum shift the following week, sparked by widespread buying responding  to the unexpected U.S. presidential election results.
This time though,  NYA’s 200-week moving average lies as far south as the 11,360 vicinity, which means the index has quite a bit of room to keep falling before this trendline can “come to the rescue” again. So now the NYA 200 week average is in correction territory with numerous former layers of support  looming overhead as resistance that it must clear on its way back up.
That said, perhaps the likeliest scenario from here is not that NYA (and its more “popular” counterparts) keep tumbling until it meets up with longer-term support levels, but that it continues to trade in a wild, volatile, choppy range until longer-term support levels gradually catch up to the meteoric gains racked up during the massive bull run experienced by stocks during the nearly two-year post-election period.