Friday was a very telling day. Four major tech stocks — AMZN, GOOGL, META and MSFT– got whacked after reporting earnings during the week, which would lead you to think the NASDAQ would get crushed. Instead, what could have been a disastrous week for the bulls ended up on a very positive note. And, as you can see in the chart below, on Friday, the Volatility Index (VIX) moved back below its 200-day moving average as traders breathed a sigh of relief.
As you can see in the chart above, the last time the VIX moved below its 200-day with conviction was late July. And as visible in the chart below, the S&P made a move higher at the same time, rising 10% in just a few weeks. And you can also see a bullish close above the 50-day moving average on Friday, as well as some key levels of resistance should the market continue moving higher.
Of course, during the current Bear Market, we’ve seen a number of rallies fizzle out, just when it looked like the coast might be clear. So there’s no guarantee that the market will continue moving higher. But, as our Chief Market Strategist Tom Bowley pointed out to our members in a Special Market Update last Thursday, we have begun the MOST BULLISH period of the year, which runs through January 18. Couple that with the very positive action on Friday in SPITE of the disappointing earnings of those highly visible tech giants, as well as a more positive VIX, and one could argue that we’ve seen the worst of the selling for the year.
The next key event will be the Federal Reserve Interest Rate announcement scheduled for next Wednesday. November 2. Everyone is expecting an increase of 75 basis points, with another .75 in the following meeting. The market reaction to the Fed announcement might give us some clues as to where the market is headed in the near term. My bet is that once the announcement is out of the way, the market will be free to move higher into year-end. In the meantime, you are invited to join Tom Bowley, who will be conducting a FREE webinar next Saturday, November 5 that will focus on “Market Manipulation”. You will be amazed at what goes on behind the scenes that puts retail traders at a distinct disadvantage. We’re going to have a full house so if you want to learn more and save a seat, just click here.
At your service,
John Hopkins
EarningsBeats.com