At the beginning of the month (October 4 & 5), global equity markets broke through key technical levels. (The 20-day simple moving average, has and always will, be my de-facto technical indicator). A breach and a break of this level usually suggests more to come. By the close of October 5, the USA500 (the world’s most important stock market) & USA100, UK100 and GER30 had all closed below their respective 20 SMA. The USA30 and JP225 followed the trend by October 10.
Today, all 6 key global equity markets trade well below their 20-, 50- and even more importantly, 200-day simple moving averages. A review of history and previous Octobers suggest that this is no coincidence. The Wall Street Crash (1929) and Black Monday (1987), both occurred in October. The final week of the month can be especially interesting.
“The fourth-quarter record is weak over the long term and has steadily worsened in recent years. Be especially careful on 26 October. It has a a poor record over the long run. No one can explain why, but both 26 and 27 October are often slammed when they land on Friday.” Schwartz Stock Market Handbook – comments regarding the last trading week of October for the UK100 from data stretching back to 1919. All markets (Equities, Bonds and Forex) have a habit of repeating themselves. Today is Friday October 26.
The UK100, has touched 6870 today which represents a 2018 low. Daily Support is at 6824 and 6770 with Resistance at 7050 and 7145. On the weekly chart the next key support zone is at 6680 from lows in Q4 2016. The technical Death Cross (50 SMA crossing blow 200 SMA) also completed October 5, the Parbolic SAR flipped October 4 and the RSI has struggled along the key 30.00 level for the last 15 trading days. The MACD histogram sits at -127, coinciding with the signal line. The trend remains the swing trader’s friend.
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