October so far has delivered more than it promised on the volatility front. We had a sharp drop in futures yesterday, with a slow reversal into the end of the tape. Did this bring the bulls back? We could see the first shy move made by the bulls in the afternoon, with a strong close, and today is confirmed by green futures. The action is hard to be trusted, but technical analysis shows me that we could start giving it a chance.
The $SPY made an impressive reversal as it managed to get over the 8 day EMA and it closed above it. The backbone of the market showed resilience and health, and therefore we could start to put a small portion of risk on. Today’s goal is to stay above this level $434.34 and to climb towards and conquer $437.04. The woods are thick and fear and confusion in the market have been high, therefore move tactically in order not to get chopped up. The ADP numbers were hot, which showed that the market does not fear Covid as much, and is preparing for a post-pandemic world, as we have vaccines and a promising Merck pill as weapons.
The technology sector has been for sale for the past two weeks and money has been flying out of it in favor of reopening stocks and of energy. However, yesterday we saw the first real rally back to positive territory in the past weeks. The $QQQ managed to get and stay above 100 day EMA of $358.48 but it did not manage to get to the 8 day EMA $360.34. If yesterday’s action is to be trusted it should get to the latter level and push towards $363 in order to erase this downward move. In order to try things out and at the same time not risk too much capital I have bought some call options in $MSFT, $AAPL and $AMZN for this Friday. I did this in order to protect my capital and at the same time to leave the door open for the bulls if they want to come out and play.
Again I have given you 2 charts today because this is all that matters in today’s reality. If the indices are healthy the other stocks will follow suit, if not, you know drill: get out and wait. I believe today we could see a strong green day for the bulls, since Asia is also strong, and the Washington situation is more clear. If we get above the levels mentioned in $SPY and $QQQ don’t be shy and put some capital to work.