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Lack of confidence has stocks lower

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Stocks are under some selling pressure this morning after the Conference Board said that its October consumer confidence index tumbled to 79.4 from September's 93.7 level, which was well below economist's expectations of 90.1.

"The outlook for the holiday retail season is now fairly bleak," said the Conference Board.

Treasuries are surging higher on the news with the shorter-dated 5-year December futures (fv02z) surging +0.78% at 113'190 as YIELD falls to 2.764%, while the benchmark 10-year December futures (ty02z) jumps 1.14% to 114'210 with YIELD plummeting to 4.82%.

Stocks are decidedly lower with sector action showing Gold/Silver (XAU.X) 66.35 +2.96% and the Dow Jones Home Construction Index (DJUSHB) 307.50 +0.32% holding marginal gains on thought that the spike lower in Treasury YIELDS will have mortgage rates falling in unison.

Today's action has the Dow Industrials (INDU) 8,204 -1.96% breaking a triple-bottom and giving the sell signal at 8,250. While the Dow had not traded this level at the time of the chart's print capture, the move here is defensive and hints that supply is beginning to outstrip supply. Subscribers that were with us back in late August know only too well the potential downside implications here. Not only for the Dow Industrials, but also the S&P 500 Index (SPX.X) 869 -2.3%, S&P 100 Index (OEX.X) 441 -2.37% and NASDAQ-100 Index (NDX.X) 946 -3.4%.

Dow Industrials Chart - $50 box

Not shown on the above chart is today's trade at 8,250 and eventual trade at 8,200. This action now has the Dow Industrials building a bearish vertical count to 7,850. Currently, we would be monitoring the Dow for support at the 8,050-8,000 level.

After today's action, we'll be monitoring the bullish % charts carefully. In recent updates, we've noted that the bullish % levels of the various indexes were just shy of previous bullish level found in late August, giving traders and investors a feel for risk. In essence, the bullish % charts, while still bullish have the various market indexes as "risky" as they were in late August. With the pattern recognition we're seeing in the Dow Industrials and buying in Treasuries, stock look vulnerable to the downside here.

Jeff Bailey

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