T+2 and an Oversold Nasdaq and S&P

Will any of the bounces have life?

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Our View

In addition to the Gaza war causing weakness, several big-name tech stocks have also been punished.

Alphabet, Tesla and Meta have all reacted poorly to earnings, while Apple and Nvidia have been under pressure too. Microsoft popped 3% on Wednesday after earnings, but gave up all of its gains a day later. While Amazon is rallying this morning — up about 5% in pre-market trading — it’s not even making up the losses over the last two days. Visa and Mastercard have reacted poorly to earnings as well.

It’s not just a handful of stocks that are getting totally pummeled, it’s the market leaders. I am not a stock guy, but tell me I’m wrong — this looks bad. There have been times in the past when I looked at something and said, “give it time, this will get better.”

For that to happen now, there will have to be a lot of big fixes, which I don’t think the government can do. What we do know is that government spending is going to come back to haunt us. The government’s way of fixing things is just to print another trillion dollars.

Do you remember when a $100 million was a lot of money or $500 million? Remember in the credit crisis when the Fed started tossing billions around? It was unheard of. Now it’s trillions. Call me foolish, but how can this end well?

Our Lean

Keep selling the 30 to 50-point rallies, no one wants to still be long going into the weekend. I still think we see lower prices, but I also think the ES acts very oversold and you always have to be on guard for a short-covering rally that leads to a low.

Remember, today is the week 4 FRYday options expiration and Monday and Tuesday are the final days of October, so I expect some big swings. Additionally, today is T+2. Let’s see if the bulls can muster up a rally to sell.

It doesn’t look like October’s bear-killing rally is going to show up this year. Unlike many, I do think there will be an end of the year rally — I just have no idea when it starts.

For those of you who like HandelStats levels, here they are:

MiM and Daily Recap

The ES sold off down to 4171.50 on Globex and rallied after the US GDP came in stronger than expected, and then opened Thursday’s regular session at 4169.50. After the open, the ES rallied up to 4205.00 — the high of the day — sold off down to 4190.50, rallied up to a lower high a 4204.00 at 9:44 and dropped down to 4177.25. From there, it back-and-filled from 10:04 to 10:25, then the ES dropped down to 4176.25 at 10:25, rallied just above the VWAP at 4189.75 at 10:29, dropped down to 4174.75 and then shot up to 4200.50 at 10:54.

The ES traded back down to 4170.25 at 11:42, traded up to 4180.75 at 11:59 and then tanked down to 4150.75 at 1:01. After a rally up to the 4263.50 area, the ES traded down to 4146.25 at 1:30 and then traded all the way up to 4191.25 at 3:03 before dumping back down to 4154.25 at 3:48 as the early MIM showed $630 million to sell. The ES traded 4159.00 as the 3:50 cash imbalance ‘flipped’ to $699 million to buy, traded up to 4165, and traded 4157.50 on the 4;00 cash close. After 4:00, Amazon and Intel reported earnings and the ES rallied up to 4166.27, sold off down to 4149.75, bounced back up to 4168.00, and settled at 4160.50 on the 5:00 futures close, down 50.5 points or 1.2% on the day

In the end, it’s been a punishing selloff. In terms of the ES’s overall tone, it goes like this: Make a low, rally 30 to 50 points, then make a new low. In terms of the ES’s overall trade, volume was high: 451k traded on Globex and 1.9 million on the day session for a total of 2.351 million contracts traded.

Technical Edge

ES

Levels from HandelStats.com

NQ

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!