ASX 200 to fall, S&P 500 enters correction territory + 5 oversold indicators to watch

ASX 200 futures are trading 67 points lower, down -0.99% as of 8:20 am AEST.

MARKETS

• S&P 500 lower, finished near worst levels and down 4.7% last week
• Better earnings and yield stabilisation offered no reprieve for markets
• S&P 500 falls deeper into oversold territory, trading at over two standard deviations below its 50-day moving average and furthest below its 50-day in just over a year, according to Bespoke Investment Group
• Oil higher on Mideast headlines but still down 3.6% for the week
• Gold pushed through US$2,000 for the first time since May 16
• Bullish focus points for the week: Bond yield stabilisation with the 10-year back below 5.0%, S&P 500 Q3 earnings so far up 2.5% vs. the -0.3% expected, contrarian buy signal from oversold technical indicators and more China policy support headlines
• Bearish focus points for the week: Underwhelming big tech earnings, bond market volatility remains elevated, potential for another BoJ policy week, technical deterioration with the S&P 500 back below its 200-day moving average, Middle East tensions remain elevated with potential for broadening
• Ominous signal from markets as yields slide but equities fall too (Reuters)
• Market punishing Q3 earnings misses at 2nd biggest rate since 2017 (Bloomberg)

STOCKS

• Amazon revenue and earnings smash analyst expectations (Bloomberg)
• Intel gives upbeat forecast with recovery in PC sales fueling results (FT)
• Western Digital and Japan's Kioxia call off merger talks (Bloomberg)
• Ford stock slides as earnings miss, pulls profit guidance (Yahoo)

KEY EARNINGS

• Recap: "We had a strong Q3 as our cost to serve and speed of delivery in our stores business took another step forward, our AWS growth continued to stabilise, our ad revenue grew robustly and overall operating income and free cash flow rose significantly." – CEO Andy Jassy
• AWS deals: “We signed several new deals in September … but the collection of which is higher than our total report deal volume for all of Q3.”
• Ad growth: "We also continue to see durable growth in advertising, which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products."

• State of the consumer: "The consumer is clearly under pressure with inflation over the past year … We continue to do well not just across our income levels, but with the lower income, they're holding up really well." – CFO Jack Hartung

CENTRAL BANKS

• ECB throws market crumbs of comfort against a turbulent backdrop (Reuters)
• BOJ faces growing pressure to shift further away from yield control (Reuters)

GEOPOLITICS

• US strikes Iranian-linked targets in Syria after attack on American troops (FT)
• Israel's army ready to invade but government divided on next stage (Reuters)
• EU leaders urge pauses in Gaza bombing to get aid in (Reuters)
• Zelensky says Russian drone attack targeted nuclear power station (London Times)

ECONOMY

• US consumer spending exits third quarter on strong note (Reuters)
• US economy grows at fastest quarterly pace since 2021, PCE price index less than forecast (Bloomberg)
• Tokyo core inflation unexpectedly rises for first time in four months (Nikkei)
• China industrial profits rise in September as growth stabilises (Reuters)

Oversold Conditions

The S&P 500 undercut its 200-day moving average last week which triggered some systematic selling pressure, according to Bespoke Investment Group.

Despite the technical deterioration, the Index is deeply oversold.

• S&P 500 is trading at more than two standard deviations below its 50-day moving average
• Index is furthest below its 50-day moving average in just over a year
• BofA Bull & Bear Indicator down to 1.5 from 1.9, the lowest since last November and the second consecutive week in which its flagged a contrarian buy signal
• AAII Bull-Bear spread down 4.8 percentage points to -5.3%, below its historical average of +6.4%
• NAAIM Exposure Index down sharply, S&P 500 went from near 100% allocation in May to almost 20% exposure in October