Ridiculous price action last week.
I am still rattled by the price action last week where we saw the mother of all green candles even after a horrible CPI print. We gave up part of those gains on Friday, but that is not enough to tell us if that rally was a bull trap or a sign of how markets will trade next week. NFLX earnings on Tuesday sets the mood for this market.
SPY precariously balanced and looking scary!
We are at a very tricky level. One break of June lows sends to pre-covid crash levels. On the other hand, earnings can provide a much needed helping hand to these markets and we can see a solid recovery materialize in the coming weeks.
SPY 3Y weekly chart looks no better either
Not much has changed since last week as far as SPY 3y chart is concerned. We are still at that point where pre-covid crash levels are right around the corner.
Market moving events next week
There are no scheduled macro-economic events that can rattle the markets next week. However, earnings season will be in full swing, and all eyes will be on earnings.
Next week is loaded with earnings!
The week is overflowing with interesting earnings. NFLX and TSLA are 2 important ones I am watching out for. If NFLX dumps again on Tuesday, it takes Nasdaq down with it, and that can trigger that sell-off which will break June lows for good. On the other hand, if earnings come strong throughout next week, I will continue to add bullish trades for future expirations.
Macro Analysis (VIX)
VIX still pretty high. One interesting thing to note is that if you go back in the last 15 years, bear markets have usually ended when VIX shoots up to 40 and beyond. We haven’t seen any of that happen during this year yet.
Spread Tracker
- Bad CPI data would give any logical person all the reason to lean bearish and I added a bunch of bear put spreads on 10/13
- But the markets turned around and put in a historical rally which baffled everybody. We did give up some of that rally on 10/14 but we still have a higher high and a higher low. I may have to act on those put spreads, based on what next week brings. The plan is to use PNR and 50% loss rule to manage those, if they start turning into losers.
- 11/4 and 11/11 are leaning bullish and I will only mess with them when there is 14 DTE left. I don’t believe in overmanaging deltas as that can drive you insane by constantly adding/removing trades.
Key Takeaways
- Earnings can drive the market in any direction
- Fed’s beige book is an important event, although I don’t consider it a binary event since Fed’s outlook is no secret at this point.
CHEAT-SHEET
No prizes for guessing we are knocking at the door of new lows for the year.
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