Interesting price action this week with the SPY gapping down over night, and bouncing back off the Greenline support this morning (now sitting around 344), after a few days of light selling. Headlines starting to turn negative here, with "stimulus pessimism" being blamed for much of the sell-off. Market up = stimulus optimism, market down = stimulus pessimism. If only it were that simple.
Jobless claims came in hot today around 900K, and over 10MM people still unemployed. This says it all. As we head into the fall/winter season, businesses could face significant reduction in foot traffic, and revenue, and this may lead to another surge in lay-offs as soon as this month. This is notwithstanding the fact that a reversion to "lockdown nation" could exacerbate the situation immensely.
The bulls are going to fight to keep us above the Greenline support on the weekly, as it would mark the first weekly candle above the Greenline since we broke through the week of Sep 21st. This is key for the bulls to maintain the bullish continuation theory. But, with markets sitting near all-time highs, the 50 day MA at 339, and the 100 day MA at 327, the risk is clearly to the downside, particularly when volume/market depth is this weak.
SPY is looking more and more like a double top each day, but I'm still not ruling out the possibility of a head and shoulders, either. Price action has been consistently distorted by overly optimistic sentiment, and an addiction to "liquidity," so when we see a notable correction, I have no doubt we'll be looking at the 300 level as major support.
Vix continues to trade above it's 50 day MA, which is now trending up. We gapped back up to the 100 day MA over night, and tested a key resistance channel around 28.80. If we break above this level today, tomorrow could be a shit show in risk assets. We all know risk happens fast, and although the elevator has been out of service for a while, never underestimate the markets ability to surprise you, just when you get comfortable. Stairs up, elevator down.
Thanks for your time today guys, and as usual, I'll be posting updates throughout the day - so stay tuned! Cheers, Michael.
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Small bounce here back up to the 200 period MA on the 15 minute (345.46). This has acted as solid intraday support since we broke above on Sep 25th. 50 period MA on the hourly (345.89) looking like a nice short-term target, before a continuation of the intraday downtrend. Sitting at the bottom of the BB on the hourly, though, showing a potential reversion to the mean around 350 is also possible. Volume is anemic. Let's see what happens next...
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Seeing some headlines that the Senate Judiciary is issuing a Subpoena to Jack Dorsey after Twitter moved to suspend Trump Campaign, and House GOP accounts over the Biden bombshell. After the dems "leak" about breaking up big tech recently, and now this, it's not looking too good for the Nasdaq. Mega-Tech has led this entire melt-up, and is domino number 1 in a crash. Volume picking up here on the majors, PPT miracle bids, perhaps? With mega-tech options expiry tomorrow, we could be in for some serious volatility soon. Stay tuned...
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Fourth test of the 50 period MA on the hourly since the open. Bulls knocking on the door and trying to get in, but this MA has now become resistance according to polarity principle. There's a "No Entry" sign on the door, while the bulls attempt to fill the over night gap at the 347.14 level. Let's see if they can break through...
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45 degree laser pump into power hour on a 1% over night sell-off. Anyone seen this show before? Cough cough (Buy-backs) cough... Mega-Tech making good use of those tax-payer funded, FED loans. I still see this as a technical bounce, though, preceding another leg lower. Remember, once we stay below 350 on the weekly close, the momentum shifts to the downside. This is a key level to watch heading into the weekend.
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Successfully filled the over night gap. Clearance sale?
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Majors fighting their way back to even on the day. Nasdaq struggling as can be expected. Small caps and the dow, back in the green. SPY blew through the gap, as if it wasn't there, and we're now trading just above the 21 period EMA on the hourly. We're also now trading outside channel resistance formed from the recent peak on Oct 12th. Will the bears show up in the next 10 minutes to share an opinion about price discovery?
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Convincing bullish price action into the close today. We closed above the Green trendline support, and above all major daily supports. On the hourly, the RSI has rolled over hard since it's high of 84+ on Oct 12th. We filled the over night gap at 347.14, and closed above the hourly 50 period MA (346.62).We got rejected at the hourly 21 period EMA showing a lack of conviction outside the downward channel formed on Oct 12th. With Mega-Tech Op-Ex tomorrow, I suspect we'll see some fireworks. Keep an eye out for earnings, as they roll in, because this will reveal individual stock weakness as an indication of broader market weakness. Tomorrow should be interesting to say the very least, so I hope to see you guys at the show. Thanks for your time today guys. Cheers, Michael.
Nice! Could go either way here but my prediction would be that stimulus will be confirmed by next week in conjunction with tech earnings that will beat estimates by a wide margin. In this manner, today's price just found support and it is time to buy dips!
Hedge_Of_The_World
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@poister198, Thanks for the comment! I agree. We may see some kind of stimulus deal in the interim, but I think it may end up being a sell-the-news event. Imo, much of the rumor has been bought, and "hope" has been priced in from the MSM's constant obsession with market optimism, adding to the current distortion in price discovery. Tech earnings could be a big lift for sentiment, and you're probably right that they may beat by a wide margin. But, my concern is a drop in corporate advertising, and weakness on the retail front. Maybe I'm wrong, but either way it should make for an interesting couple weeks ahead as we approach the election. Good luck out there today, and thanks again for commenting, I appreciate it.
fortunawatches
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YOU ARE CORRECT100% . I m saying 2600 by mid December
Hedge_Of_The_World
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@fortunawatches, Thanks for the positive feedback! I really appreciate it. 2600 is an important level, you might be right. Next week's price action will be very telling as we approach the election. If this plays out as a head and shoulders, with the neck at 3000, we could see 2500 before we get any real support. Personally, this is the move I'm positioning for. Good luck out there next week, and thanks again for the comment.
MacBull1557
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I agree with some of your comments, I'm actually more bearish in the short term, you see, the price action is way way over it's real evaluation, and there is no way this can be sustained, if you looked before each dip, most of them at least we are at the same distance before any crash, a double top is possible, a drop to near 5 ma is a must and invadable, if you look at the MFI, RSI, MACD, CPCE, Maclin and the dollor price heading up, you will know that visiting 313 range is where spy heading within the next couple weeks. tomorrow, it will go up to 350 and will try to go higher on Friday as a bounce back . then decline decline, even when stimulus priced in already, you see the max value for spy is 360 where it's highest evaluation pe ratio , usually we were around 3. and 3.4 , now we are at 3.5 , ,,,max is 3.6 , as for the US dollor, the higher it's value goes the more pressure it will have on stock and commodities , Yes I'm very bull after that and we will see new records in the next 5 years, but the next 3 months will be unstable up and down in range of 10 to 15% .
Hedge_Of_The_World
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@MacBull1557, Very well said, and thank you for the comment! Today's price action will be very telling. Retail came in strong this morning, so I imagine we'll see a pump on the open (as usual). But, if smart money isn't selling this rally into the close, maybe there's no more smart money. I wouldn't be surprised if we see 350 today, as you said. But, once we reach this all-time weekly closing high (350), I think we'll see some heavy selling follow. Whether this happens today or next week is anyone's guess. Imo this is a technical bounce before another leg down, but we'll see how it plays out. Good luck today, and thanks again for sharing your thoughts. I appreciate it.
chuckk555
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Possible bear Flag Spotted on the 5 Day Chart - let's see how this shakes out for the rest of the day
Hedge_Of_The_World
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@chuckk555, Thanks for the comment! Great point, let's see if the bears show up, and take advantage of the liquidity heading into the close.
chuckk555
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@Hedge_Of_The_World, Yep - Great post by the way. I'm hoping that 347.14 Resistance holds. If so, I think we are going to gap down late today/tomorrow. Something to note, we have hard support @ ~342.