9:10am (EST)
The bears waited until the last day of October to put a little scare in the bulls as they were able to push the market lower by 2%. Monday’s drubbing was the worst session in a month but the bulls didn’t seem to care as they ended October with double-digit gains.
The Dow fell 276 points, or 2.3%, to end at 11,955. The index traded to a low of 11,954 and closed just below its 200-day moving average (MA) after failing to hold the 12,000 mark. We mentioned in our Weekly Wrap there could be a test down to 11,900 if 12K was taken out and support is at 11,800 which will need to be watched carefully. Resistance remains 12,200 then 12,350. For the month, the blue-chips jumped an impressive 9.5%.
The S&P 500 dropped 32 points, or 2.5%, to settle at 1,253. The index was able to hold the 1,250 level but went out at its lows and also fell below its 200-day MA. There is further risk down to 1,225 which is where we are likely headed while 1,275 remains resistance. For October, the S&P surged 10.8%.
The Nasdaq gave back 53 points, or 1.9%, to finish at 2,684. Tech was unable to hold the 2,700 level and also slipped below it 200-day MA. There is further downside pressure to 2,650 followed by 2,600 if the bears get aggressive while resistance at 2,750 remains a hurdle. Despite Monday’s selloff, the Nasdaq still rose 11.1% for the month.
Although the bulls did a good job of holding support and we expected a pullback, we were a little surprised to see a 2+% decline to start the week. We had factored-in a dip to support but didn’t think the bears would get here until mid-week which means the indexes could get “stretched” before the uptrend continues.
The S&P Volatility Index (^VIX, 29.96, up 5.43) zoomed more than 20% yesterday buy still stayed below 30 which also favors the bulls. However, given the fact that volatility is likely here to stay, we could see the mid-30’s come into play on another leg down.
Our open option trades held up well with one of them now up 123% on a stock that hit all-times highs again on Monday. We have already locked-in half profits but this is a trade that keeps on giving.
We also have high expectations for our latest recommendation which should get a lot of action when the company reports earnings on Thursday.
Futures are pointing towards a rough open so we will test lower levels of support at the open. Dow futures are down 226 points to 11,671 while S&P 500 futures are off 36 points to 1,212. Nasdaq 100 futures are showing a decline of double-nickels to 2,300. Subscribers, check the Members Area for the updates.
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