Stock Market On Verge of Breakdown

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NASDAQ:QQQ   Invesco QQQ Trust, Series 1
I've seen a lot of doom and gloom posts all over Tradingview recently and I just wanted to provide a different perspective.

It's October 29th 2020, the market just put in a lower high and we all know what comes next right? A lower low and the start of a down trend. It's very obvious, especially when you read the news. There is no way the market is sustainable at these levels given what's going on around the world. Here are some CNBC headlines from October 29th, 2020:

Dow sinks more than 900 points for its worst drop since June amid rising virus cases globally

Coronavirus updates: U.S. records more than 80,000 new daily cases

Stocks slammed by virus, election, and the next test is Apple, Big Tech earnings

Investors should brace for a ‘fairly scary time,’ Wells Fargo warns

French President Emmanuel Macron imposes new nationwide lockdown as coronavirus cases surge

Many would assume with the lower high and the world falling apart that the market has finally reached the top and a bear market is inevitable. This is certainly a sell.

But then, this happens....

It's important to keep our emotions in check and not make assumptions based on the news we read. Yes the market could crash from here, but it could crash from anywhere at any time. The bull trend is still intact until we make a lower low, but even then the buyers could invalidate the move with a strong push up.

If you believe the rising federal interest rate is the catalyst of a bear market, you need to question why you believe that when there is data on the contrary that shows the market has only grown in the past with a rising interest rate. Please see my related idea below for more details.

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A general rule of thumb is that 80% of break downs during a strong bull trend will fail. Given the volume seen today, it's very possible the shorter term bear trend is reversing after a capitulation event (everyone who was willing or panicked into selling, sold). It appears bulls were able to invalidate the lower low the bears tried for today. The bulls next target will likely be the 200 day moving average (blue moving average line).

Daily chart for VIX signaling that volatility may have peaked:

I'm not big into fundamentals, but Apple just beat earnings estimates on all products (except iPad) despite supply issues. They also said they see supply issues not being as much of an issue in the upcoming quarter.

This matters because Apple makes up 12% of NQ and is by far the most influential company in the market.
Monthly chart is still holding at support. The candle it is printing currently looks ugly for the bulls. Usually after a break of the 200 day MA bulls are able to bring it back to that level at least for a retest however this time may be different. If the month ends with a bearish engulfing that would be a very bad sign for the bulls, but the bullish trend is still intact, although it is hanging by a thread.

My goal is to find the best risk:reward setups. For instance, if you risk $1,000 at a chance to make $5,000, you can afford to be wrong 4 out of 5 times and still not lose money. I hit my targets over 50% of the time.

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