Daily Commentary: October 08, 2020

Jeremy Engelbrecht1Option Commentary

This Is A Very Bullish Pattern – Buy Stocks If We Close Above This Level

Posted by Pete Stolcers on October 08

Tuesday Trump said that stimulus bill negotiations will resume after the election. The market dropped on the news and he backpedaled instantly. Yesterday the market recovered all of those losses and this morning it is challenging the highs from a month ago. The bottom line is that a stimulus bill will be passed; we just don’t know when it will happen or who will approve it.

If Republicans win the election it will be a $1.5 trillion stimulus package focused on workers and small businesses. If Democrats win the election it will be $2.5 trillion and it will include aid to states that have been hard-hit by the virus. There is also a piecemeal plan that is being considered where stimulus is offered to hard hit industries. Airlines are in dire straits and a $25 billion bailout is being considered by both parties.

Into an election, neither party wants to look like the “bad guy”. The market is addicted to easy money and the stimulus bill is all the market cares about right now. Every wiggle and jiggle is related to that news.

The economic data points have been decent and the economy is not walking off a cliff. ISM services, ISM manufacturing, ADP and Consumer Confidence were good.

Earnings season is approaching and that always attracts buyers.

Swing traders should be ready to jump into action. From a technical perspective an inverted head and shoulders pattern has formed. This morning we will break through the neck line and if we stay above it we will aggressively take bullish positions. Sell out of the money bullish put spreads on stocks with heavy volume and relative strength. Sell the bullish put spreads below technical support and sell options that expire before the election. PopBull and Buy into Earnings are my favorite two swing trading searches in Option Stalker.

Day traders should favor the long side. The buying pressure has been steady and dips are an opportunity to reload. Heavy buying, Relative Strength 30 and Bull Run are my favorite Option Stalker searches. The price action on the long side has been sustained and that is where the best trades have been in the last two weeks.

You can ignore the political rumblings and the stimulus bill “noise”. The market wants to go higher.

Support is at the 50-day moving average and resistance at $342.50 will be challenged today. The next resistance after that is the all-time high.

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