Daily Commentary: October 16, 2023

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Today’s Trading Game Plan

Posted by Peter Stolcers on October 16

This is likely to be a light volume inside day. Here is the best set up for us today.

PRE-OPEN MARKET COMMENTS MONDAY – The market is wedged between the 200-day MA and the 100-day MA. Running through the middle of that range is AVWAPQ. The economic releases this week are fairly minor and the focus will be on earnings.

Banks will dominate the earnings scene this week. JPM and WFC rallied Friday, but both stocks have been in downtrends and both finished well off of their high of the day. This feels more like an oversold bounce than the start of a trend reversal. NFLX and TSLA both announce earnings this week.  

I am not expecting a big year end rally, but we could challenge the high of the year. There will still be bid checks along the way to confirm that buyers are still interested, so don’t expect a big snap-back rally. This is going to be a gradual drift higher with higher lows.

The market tends to keep doing what it has been doing. This has been the prevailing pattern this year. The economy has not fallen off of a cliff after the most aggressive tightening in decades and there are not any signs of a credit crisis. Inflation remains a concern and stock valuations are fairly rich. The Fed is close to the end of its tightening cycle. Some Fed officials said last week that the big drop in bonds recently is doing the heavy lifting for the Fed and they might not need to hike rates. This backdrop can suit buyers and sellers on any given day and the price action is driven by the most recent headlines.

Swing traders can sell out of the money bullish put spreads on strong stocks. I believe the market will hold the 200-day MA through year end and there is a good chance it will start to grind higher from this level.

Overseas markets were mixed overnight (Europe up and Asia down).

The news and overseas price action does not justify a big opening gap higher. The range from last Friday was big and we are likely to stay inside of it today. 1OP is going to complete a bullish cycle to start the day. A gap reversal like the one we saw Friday is very likely. If the market is able to advance early, I am expecting mixed overlapping candles on light volume. This is our best scenario since I am ultimately looking for a bid check and a possible gap fill. Traders are going to wait for earnings releases and the market will wait for those reactions. I would be looking for good shorts to day trade early in the day. This is likely to be a light volume inside day so keep your size and your trade count down.

Support is at $431.31 (AVWAPQ) and the 200-day MA. Resistance is at the high from Thursday and the 100-day MA.

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