STOCKS BOUNCE OFF LATE OCTOBER LOW -- THIS WOULD BE A LOGICAL SPOT FOR A SEASONAL RALLY ATTEMPT -- HOW FAR IT CARRIES WILL BE VERY IMPORTANT -- NASDAQ 100 QQQ IS ALSO OVERSOLD ON ITS DAILY CHART -- ITS WEEKLY CHART, HOWEVER, SHOWS LONGER RANGE DAMAGE

S&P 500 REBOUNDS OFF LATE OCTOBER LOW... Stocks are off to a good start to the post Thanksgiving trading week. And they have at least three things working in their favor. One is the proximity to their late October low. The other is a short-term oversold condition. The third is seasonal support. The daily bars in Chart 1 show the S&P 500 trading higher today (along with all other stock indexes and most stock sectors). After an early November rebound, the SPX is now undergoing a retest of its late October low. That's a logical spot for some bottom-fishing to emerge. Short-term indicators are also showing some improvement. The top box shows the 14-day RSI line for the SPX stabilizing above the oversold threshold near 30. The fact that the RSI line is above its October lows is typical of short-term bottoms. Its daily MACD lines (bottom box) have turned negative, but to a lesser degree than during October. That's another encouraging sign. So is the fact that stocks have entered a more supportive seasonal period between Thanksgiving and the end of the year. So far, the market has lost only about -10% which qualifies as a normal correction. Assuming the October low holds, the next step should be a yearend rally attempt. How far that rally carries is the big question. The absence of a rally, or any signs of it failing, could have negative longer-term implications. A yearend rally would still have to contend with longer-range technical indicators which have turned negative (more on that shortly).

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Chart 1

NASDAQ 100 QQQ ALSO LOOKS OVERSOLD ... The technology-dominated Nasdaq market has fallen further than the Dow or S&P 500. Chart 2 shows the Nasdaq 100 Trust (QQQ) even falling below its October low. The good news there, however, is that its 14-day RSI line (top box) is showing positive divergence above its oversold line at 30. And its daily MACD lines (bottom box) could be forming a short-term "double bottom". That could pave the way for an oversold rally attempt. Even if that occurs, however, the QQQ has a lot of overhead resistance to overcome to repair recent technical damage. First and foremost, it would have to clear its 50- and 200-day moving average lines. It would then have to exceed its early November peak near 175. Even then, the QQQ would still remain well below its September highs. That's a lot of lost ground to make up. Especially when its long term uptrend is weakening.

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Chart 2

WEEKLY TREND OF QQQ LOOKS WEAK... The weekly bars in Chart 3 show longer-term technical damage having been done to the QQQ. First of all, it has fallen below a nearly three-year support line extending back to the middle of 2016 (as well as its 40-week average which isn't shown). Even worse is the sharp drop in its weekly MACD lines (top box). Their plunge since the end of the third quarter is alarming. The red MACD histogram bars (which plot the difference between the two MACD lines) have fallen below their early 2016 low. In addition, the red volume bars (lower box) show recent stock losses taking place in heavy trading. That's a bad combination. Chart 3 is symptomatic of longer range trend warnings being given by all the major U.S. stock indexes. And shows why any fourth quarter rally in stocks could have a lot of longer-range headwinds to contend with.

Chart 3