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Bears making progress away from 1,082

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We identified the 1,082 level as a relatively near-term level that equity bulls wanted to see the S&P 500 stay above in recent sessions. For the bulk of this week, the S&P 500 ($SPX.X) had been able to stay above that level on a closing basis, but today's action to the downside has the bears getting the upper hand on things.

S&P 500 Index Chart -

With MACD rolling just below the zero level and the SPX falling back below 1,082, look for bearish traders to start getting aggressive with their shorting. First sign of technical strength for the S&P 500 looks to be a move above the 50-day moving average. Something the S&P 500 hasn't been able to do for some time. I don't think that bears will have a picnic getting the SPX down to 1,011 anytime soon. For whatever reason, there were buyers at the 1,050 level in early October and the SPX was able to make an upward move above 1,082 for there, so bearish traders will want to see some type of close below 1,050 before they get visions that 1,011 is realistic.

Biotechnology Index Chart -

Once again bulls turn to the biotechs (or at least they should be) to see if there's any "hope" for the NASDAQ. We're not seeing any leadership here, but traders/investors in the group aren't looking at a 3% decline either. You get the distinct feeling this will be the last technology group to give back gains should the S&P 500 (SPX.X) and NASDAQ (COMPX) continue to fall. Should the S&P 500 and NASDAQ firm up, that firming will most likely be due to the BTK.X and that group of stocks showing further strength.

I'm noticing a rounding 50-day MA on the biotechs at current trading levels. As we look for similar time periods when the BTK.X chart had a rounding higher 50-day MA we look back to May and find the BTK.X trading in a similar range. After a couple of weeks of trading between $528-$562, the group made a powerful move higher to $674. Back in April/May the relative strength chart of the BTK.X reversed into a column of X's vs. the S&P 500 and that's what happened recently in early October. Will history repeat itself? Hard to say, but one reason I like the biotechs above $490 as a bulls best chance to make money in something technology related.

Jeff Bailey
Senior Market Technician
Option Investor

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