Earnings Season Jitters?
Today was a tale of two markets, thanks to NVDA, which propelled QQQ to a positive close above the daily Hull Moving Average while SPX faltered, due to pretty much everything else. While today’s weakness is certainly not a slam-dunk, SPX closing below the Hull with neutral gamma (GEX) that has moved more negative over the last few days is not an inspiring look. We have a relatively light economic calendar this week, but is the market moving lower in advance of the deluge of earnings reports coming this week and over the next couple of weeks? Is it seasonality re-exerting itself surrounding the upcoming election? We don’t need to figure out the “why,” but we can make decisions based on what is happening and heed the warning signals.
We discuss the broader market further as well as new ideas involving SLV, HD, and PYPL in our latest YouTube video posted this evening, which you can view here.
Looking at the SPX TradingView chart above, you can see we gapped below the Hull this morning, declining to below 5830 SPX (which we called in our free Discord channel around 5853 this morning), then attempted a rebound into the end of the day, still closing below the 5864 Hull, which is negative by itself. We now have greater odds of making a straight shot to 5754, but with lots of earnings reports ahead, we may see the market select the more painful chop strategy for the next few sessions, shaking out bulls and bears without seeing follow-through to the downside. Last week, QQQ also played games around the Hull, gapping above and below the line several times, likely causing pain for many traders. A continuation from here to the downside may target 5755, though even that would not ruin the upside potential for bulls to make new highs.
Historical GEX below does show SPX GEX continuing to decrease for 3 sessions in a row following the extreme 2.8B positive tag last week, which is a negative trend despite the absolute level of GEX not being negative.
SPX Total Historical GEX: www.geeksoffinance.com
One thing bulls do have going for them is that we still see a solid showing at the 5900 GEX strike for Friday, October 25, a level and date we mentioned last week as a reason why SPX might not tag 5900 10/18. So far, so good.
SPY 3D GEX: www.geeksoffinance.com
In the YouTube video linked above, we cover a number of tickers and topics, with one of those being Home Depot (HD). HD’s price has been stuck below the Hull for 3 days, with today being more of a waterfall drop down to the middle Keltner channel. The channels look bullish and we are holding the middle channel so far, with 417 being the first key resistance I see in a recovery attempt. Getting beyond 417 opens up 420 or more.
Speaking of 420, HD has solid positive GEX and a big cluster at 420, making it a high probability target in our minds. 400-405 need to hold for that upside scenario, but risk/reward looks favorable under those conditions, in my view.
HD GEX Graph: www.geeksoffinance.com
PayPal (PYPL) is another one that has been stuck under the Hull, but the channel looks very bullish, and holding 78 gives PYPL a good shot at 85.
To add to this point, we see sizable GEX clusters at 90 and 95 as well, though there’s no need to be that speculative when the consolidation we’re seeing seems to favor 80 as a beginning upside target.
PYPL GEX Levels: www.geeksoffinance.com
While the economic calendar is light, the earnings calendar might cause fright, and making rhymes is a condition I deal with late at night, so I apologize. TSLA will be the “big” tech name this week (and perhaps TXN can pretend to be an important tech name), with most of big tech being reserved for later in the month, and the rest of the big reports this week being more relevant to the Dow Jones (DIA), including some defensive names like VZ, MMM, UPS, and literal defense sector names like LMT, BA, and GD.
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