Daily Commentary: October 16, 2025

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Neither Side Has Control

Posted by Pete Stolcers on October 16
www.oneoption.com

The big drop last Friday was a warning shot. Buyers and sellers are active as the market tries to recover.

PRE-OPEN MARKET COMMENTS THURSDAY – The government shutdown continues and both sides are steadfast. With each passing day the economic impact will grow. This impasse is not going to bode well for our future credit rating and that will increase our borrowing costs.

The economic data collection has stopped because of the shutdown. Empire Manufacturing was better than expected yesterday and Philly Fed was weaker than expected this morning. According to the Fed’s Beige Book, economic conditions remain stable.

China feels it is in the driver’s seat and that it can use rare earth minerals as a bargaining chip in trade negotiations. It takes well over five years to develop the mines and refining facilities. The magnets are widely used in electronic devices, chips and electric motors and China controls 90% of the world’s supply. They have leverage and the US has retaliated by increasing tariffs on their goods by 100%. Both sides are farther from reaching a trade deal than they were a few weeks ago.

Earnings season has kicked off and banks have moved higher this week. The XLF bounced off of the 100-day MA and it is challenging the 50-day MA. This is bullish since another sector is participating in the rally. It is also a sign that credit concerns are fairly low and that is the oil that lubricates economic growth. TSM reported a 39% increase in profit year-over-year. That will help tech stocks today and earnings season will ramp up next week.

We’ve seen two-sided price action the last two weeks. That is a sign that buyers and sellers are paired off. The swings have been large and the volume has been good. This signals that a bigger move could be coming. This is a time to keep your exposure fairly low. Try to catch some intraday moves near the extremes. When a move is exhausted, expect a move the other way and try to catch some of these reversals. Of course, our best case scenario is to go long after a drop once support has formed. That puts us on the side of the longer term trend.

For swing trades I like selling put premium on strong stocks. That allows me to make money on time decay while keeping a safe distance.

Support is at AVWAPQ and resistance is at the all-time high. Overseas markets were generally higher.

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