Market Action Summary: 10/29/18


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S&P Overview: No Clear Signals Yet

  • Momentum still very bearish, with no clear sign yet of longer-term bottoming.
  • June low of 2692 is level to watch for rebound.
  • Risk of continued selling toward 2540-2600 zone, near low for 2018.
  • Selling strength (not weakness) is easiest approach.
  • Oversold squeezes like 10/23 or 10/25 should also be expected.
  • Few positives in economic trends or event calendar.
  • However, near-term bottom potentially forming after Friday doji, Monday outside day.

Charting Ideas for Volatile Market

  • Always map out key levels. When betting on reversal, try to combine a level with at least one oscillator. For example, peaks of 10/26 and today around 10/23 low. Turns signaled by stochastics and/or MACD.
  • Continue to watch 50HMA for sense of direction on @ES.
  • For short-term pivot entries, SPY 50-minute MA turns can be useful.
  • Play ranges and have discipline not to hope for break.

Volatility in Focus: It Pays to Think Big

  • In September, SPY options usually accounted for about 10-12% of total market volume.
  • Since October 4, it’s been 15-20% of total options market activity.
  • In September, SPY was only ETF in the top 10 symbols for TradeStation clients.
  • In October, 5 of 10 busiest symbols at TradeStation are ETFs.

Don’s Watch List

  • Coca-Cola (KO), Under Armour (UAA) report tomorrow morning
  • Facebook (FB) reports tomorrow afternoon.
  • Kellogg (K) reports Wednesday morning
  • Exxon Mobil (XOM) reports Friday morning.

Economic News Less Inspiring

  • GDP beats but business investment slows.
  • Rail traffic, an accurate indicator, slows.
  • Fed hawkish: Kaplan, Clarida, Mester, Bostic
  • China industrial profits, factory output languish in September.
  • In response, $$ shifts to “safe havens” like utilities, consumer staples. Money flees “risk-on” sectors like industrials, techs, materials, energy and chips.

“Growth” Ailing on Many Fronts

  • AMZN, GOOGL miss! Click here for more earnings news.
  • Semiconductor Industry Association: September chip sales weakest since December 2016. AMD, TXN, TSM hammered.
  • Biotech, medical devices sold aggressively this month.
  • FDC crash, PYPL lackluster after beat. Are electronic payments at risk?
  • Susquehanna: No more silver lining in the cloud?

New Rivalries in Tech, Consumer Discretionary

  • AMZN attacks GOOGL/FB in advertising space.
  • Target (TGT) challenging AMZN Prime Day.
  • MSFT challenging AMZN’s AWS.
  • Twitter (TWTR) potentially taking market share from FB
  • Read Market Insights for more in coming weeks.

Russell’s Watch List

  • 10/25: BHGE Jan 27-23 bearish put spread (45K contracts)
  • 10/29: PG Jan 77.50 calls → April 95 calls (20k contracts)
  • Philip Morris (PM) trying to break 200-day MA.
  • Big pharmas trying to hold: PFE, JNJ, LLY
  • DAL, UAL have upside potential after strong numbers, oil decline.
  • Oil servicers like HAL, RIG, DO, ESV, BGHE likely have more downside risk.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.