Daily Commentary: October 14, 2025

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Treading On Thin Ice

Posted by Pete Stolcers on October 14
www.oneoption.com

The drop Friday was a warning sign and we should respect it.

PRE-OPEN MARKET COMMENTS TUESDAY – The market drop on Friday was a warning shot. Moves of that magnitude don’t happen by accident. The relief bounce yesterday felt good, but the banking holiday might have contributed to its height. Trade desks were lightly staffed and there was no one to stand in the way.

A 100% Chinese tariff hike produced a 1000 point sell off in the S&P 500 this spring. Trump was wielding our trade imbalance for leverage and he stepped back. The tables have turned and China is wielding rare earth elements as a weapon and this round of the trade war has the potential to last.

Bank earnings have produced mixed reactions and that is fairly typical. Bad loan write downs are increasing, but not at an alarming rate.

The government shutdown continues and this is a dangerous game of “chicken”. Credit ratings agencies don’t like it when politicians can’t pass budgets (ort CR’s). It increases uncertainty. The “can” always gets kicked down the road, but the longer it takes, the more nervous investors will get.

I still feel that this dip has more downside. I would hold off on taking bullish swings and I would stay flexible. Buyers and sellers are battling it out and that should produce nice intraday moves. We can participate while keeping our overnight risk low. I do still like selling OTM naked puts on strong stocks that I would like to own. I am very selective.

We are in the gap from Monday this morning. I would let the market come in. If we easily challenge the low from Friday, it would be a sign that sellers are aggressive. The news has been “heavy”. The government is shut down, we don’t have any economic data and China could create supply disruptions.

If the early drop gains support above the low from Friday it could be a successful retest. That is confirmation that buyers are interested and we could see a rally off of the low in the next few days. I see this scenario as less likely.

Support is the low from Friday and resistance is AVWAPQ.

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