Nasdaq Market Update for 10/30

Original Chart

Trend lines drawn the 10/12 pivot day (15d), 10/26 (5d), and today 10/30 (1d).

Friday, October 30, 2020

If there’s somethin’ strange in your neighborhood
Who ya gonna call?

Facts: -2.45% lower, Volume higher, Closing range: 29%, Red Body: 62%
Good: Not much, small uptick at end of day
Bad: Lower low
Highs/Lows: Lower low, lower high
Candle: Thick green body, majority in lower part of candle, long top wick
Advance/Decline: 1.85, about 2 advancers for every decliner
Sectors: Energy ( XLE ), Financials (XLF) were top, Technology (XLK) was bottom.
Expectation: Sideways

Market Overview

The market sold off heavily on Friday after a big day of earnings releases that did not meet the demands of investors who were already nervous from the resurging pandemic and the pending turmoil from next weeks election. There is not much to look at on the good side other than the pullbacks will eventually create new opportunities. The index fell -2.45% in Friday’s session, with an increase in volume as investors sold off equities before the weekend. There was a slight uptick at the end of the day as bulls came in for low priced opportunities, with focus on Energy and Finance sectors. The candle has a long 62% body with a short lower wick from the last few minutes of buying, ending with a 29% closing range. There were about 2.5 declining stocks for every advancing stock.

Indexes and Sectors

The S&P 500 SPX -1.21%) did not lose as much as the Nasdaq but still saw selling on higher volume . All the indexes turned out lower highs and lower lows to end the worst week for equity markets since March. Energy ( XLK +0.56%) and Financials ( XLF +0.26%) were the only sectors with positive numbers. Technology ( XLK -2.21%) and Consumer Discretionary ( XLY -2.18%) shared the bottom of the sector list, with those sectors driving the broader market sell off. Although having many bright spots throughout the week, Communication Services ( XLC -1.69) also had significant losses on Friday.

The VIX volatility index increased +1.14% to close the week 38% higher than the previous week and well above September numbers.

Bonds

Treasury Bond spreads increased for the day. The spreads are in an upward trend channel from an August pivot . No worries from that perspective.

Market Leaders

Google GOOG +3.43%) was the only of the big four mega-caps to have gains. Apple AAPL -5.60%) and Amazon ( AMZN -5.45%) both had huge losses after their earnings releases, while Microsoft MSFT -1.10%) did not do too bad given the market condition. Each has a bit of a different profile of trading during the day. Google gaped up at market open but then sold throughout the day losing some of the early gains. Microsoft dipped over 3% but was bought back later in the day. Apple followed or drove the market, depending on how you view it, trading almost exactly along the same path. Facebook FB -6.31%), Snap (SNAP -6.70%), and Pinterest (PINS -5.70%) soared the past two weeks but gave back some ground on Friday. Most growth stocks did not fair well. Chevron ( CVX +1.02%) and Exxon Mobile ( XOM -1.06%) had opposite reactions after morning earnings reports. Both continued struggling with revenue while Chevron seems to be managing costs better.

Looking ahead

Next week is the big week that will both answer questions and create new questions. Who will win the election and what impact will that have on the market longer term? Will there be a smooth end to the process, or will the candidates start a long battle to contest the results? Can congress resume discussions for a stimulus or will we have to wait until transitions to new leadership in government?

Beyond the election, we will get updates on Manufacturing data early in the week and the Fed is scheduled to announce any interest rate changes on Thursday.

Trends, Support and Resistance

Since we are in between two support and resistance areas, there is room to move in either direction on Monday. Getting back to the midpoint trend line from the 10/12 pivot would mean a +0.90% gain. That seems a reasonable move after the uptick at today’s close and without any big context changes over the weekend.

On the downside, the one-day and five-day trend lines point to about the same place which is a -1.11% loss. The lower trend line is just above the July support area and still within a parallel channel drawn from 10/12. Breaking through this support area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000. I have added back the future possibility of reaching the June support area , a -7.21% loss from today’s close. This downward trend seems to be how the market is heading into the election on Tuesday. Following Tuesday, we could finally see a turn for the better.

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