{"id":66330,"date":"2023-10-28T16:06:43","date_gmt":"2023-10-28T23:06:43","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=66330"},"modified":"2023-10-29T08:48:34","modified_gmt":"2023-10-29T15:48:34","slug":"how-to-trade-a-bear-market-intrusion-on-an-oversold-period-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2023\/10\/28\/how-to-trade-a-bear-market-intrusion-on-an-oversold-period-the-market-breadth\/","title":{"rendered":"How to Trade A Bear Market Intrusion On An Oversold Period – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

A bear market intrusion upset the dynamics of this oversold period. The NASDAQ is back in bear market territory. Both the NASDAQ and the S&P 500 broke down below their respective 200-day moving averages (DMAs) (the blue line in the charts below) and entered “correction” territory which is 10% below the 52-week high. The iShares Russell 2000 ETF (IWM) fell to a near 3-year low. This toxic combination of bearishness threatens to extend the oversold period. Thus, the trading rules for the oversold period get more complicated. I discuss the changes later in the blog post.<\/p>\n\n\n\n

An extremely strong report on Q3 GDP<\/a> (Gross Domestic Product) delivered the biggest irony of the week. The bearish tone of the market completely drowned out the good news. GDP grew at 4.9%, even higher than “consensus” expectations<\/a> for 4.2%. As a result, the consensus continues to struggle to understand today’s economy. Consensus underestimated GDP despite the consistently strong forecasts from the Atlanta Federal Reserve’s GDPNow<\/a> which started the Q3 estimate at 3.5% on July 28th, sent it as high as 5.9% by August 24th, and effectively landed on 5.4% on October 17th<\/a>.<\/p>\n\n\n\n

Of course, good news is bad news for a Wall Street hungry for lower interest rates. Fortunately for them, interest rates came down slightly after the report. Moreover, the Fed Fund futures<\/a> continue to imply that the Fed will not hike rates further for this cycle. Still, the first rate cut is priced way out to June, 2024. The blue boxes in the table below show the most likely outcome for Fed rates (shown at the top of the column) for the given meeting date in the first column.<\/p>\n\n\n

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\"CME
CME FedWatch tool – meeting probabilities<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n

Dana Peterson from the Conference Board laid out the case for a potential hike in December and explained why, regardless, the Federal Reserve will have to maintain its hawkish rhetoric. The Conference Board also projects a shallow recession for the first quarter of 2024.<\/p>\n\n\n\n

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The Fed's rhetoric has to be hawkish, says @conferenceboard<\/a>'s Dana Peterson ahead of the central bank's meeting next week.

She shares when she thinks the consumer will crack and what are the unknowns in her economic forecast. pic.twitter.com\/AggShJcQMF<\/a><\/p>— CNBC's Fast Money (@CNBCFastMoney) October 27, 2023<\/a><\/blockquote>