The market has been in a steady decline the last two days and support at the 50-day moving average has been breached. The Coronavirus is spreading and there will not be a stimulus bill before the election. If the SPY closes below the 100-day moving average it will test $320 and perhaps the 200-day moving average. Asset Managers are reducing risk ahead of the election and that is typical.

The number of new Coronavirus cases is jumping in the US and in Europe. Major metropolitan areas are steadily restricting activity and most are in Phase 3 or lower. This will weigh on Q4 numbers.

Businesses need the stimulus lifeline and if the election outcome is delayed, the passing of this bill will also be delayed. Control of the House and Senate could be just as important as the White House when it comes to this bill. Mail-in ballots will take time to count and election officials in the key state of Pennsylvania are expecting that the results will be contested regardless of who wins. The results could also be challenged and other key states. The stimulus bill is needed now. We could also see civil unrest while we wait for the outcome.

I read and watch all media sources when I conduct my research and there was some very alarming news released last night on one of the presidential candidates. My goal is to stay politically neutral and to determine how policies will impact market movement. This source was extremely credible and the news was VERY disheartening. This could be impacting the market this morning.

On the earnings front, Microsoft posted a fantastic number. The reaction was negative and the stock will open below its 100-day moving average. This could be due to its valuation. Tech giants will also be testifying before Congress virtually and they are in the antitrust crosshairs of lawmakers. At a P/E of 23 valuations are rich by historical standards. Earnings are expected to drop 20% on average (Y/Y) in Q3.

Swing traders should stay in cash. Yesterday I suggested placing a bid at SPY $330 for a 1/2 position – cancel that order. The S&P 500 is tanking this morning and we will wait until support is established. Yesterday we bought back our final bullish but spread at a breakeven and we have one position open. We are long a GLD January call diagonal spread and we sold a November bullish but spread to lower our entry cost. I believe that gold will hold up relatively well as money tries to find a safe haven. Once the election outcome is known I believe that an excellent buying opportunity will present itself. Both parties want a stimulus bill and Coronavirus vaccines will be distributed by the end of the year. Wait for clarity.

Day traders should prepare for lots of movement today. The selling pressure is heavy and I believe the best opportunities will be on the short side. If the market makes a new low for the day after 30 minutes of trading we will have a nasty bearish trend day. In that instance you have to wait for bounces to get short. They could be brief and shallow. If the market rallies right out of the gate we are likely to fill some of the gap. This would present a better entry point for shorts once the uptrend has been breached on a five minute basis. I believe that the only thing keeping the market afloat was the prospect of a stimulus bill before the election. Without that safety net, Asset Managers are reducing risk and the bid has dried up.

We are going to blow through major support levels this morning and the 100- day moving average is likely to be tested. Resistance is at $336.