There are so many charts at key intersections that patience pays
Interest rates are approaching new highs, which has pushed stocks to new lows. Now the oil also looks higher. Time for a technical look at the markets.
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So many markets are in critical areas of the charts. A quick run through of each of these should help provide some insight into which price points to watch for bearish or bullish breakouts in the coming weeks. Interest rates will likely remain key until after the next Fed meeting in early November.
The 10-year government bond yield is fast approaching recent highs, again near the 4% level. An upward breakout would likely send stocks to new lows, while a retest of the 3.5% area would be bullish for stocks.
Two-year Treasury yields are at a similar inflection point, albeit with higher yields. A move past 4.5% would not be a welcome sight for stock traders. Note that the 2-10 is still deeply inverted, which is normally a recession sign.
The NASDAQ 100 (QQQ) is hovering right at major support near $270. Not oversold yet but definitely getting closer.
S&P 500 and Russell 2000 show identical patterns. Whether the stock will hang and bounce or collapse and fall further remains to be seen.
Gold and oil are also at major turning points on the charts, although oil is getting a little overbought in the near term.
Implied volatility in equities (VXN and VIX) is again approaching recent highs, although not quite there yet. Nervousness builds as stocks fall to recent lows.
How this ultimately turns out is a mystery. I prefer to stay hedged and nimble, which is the approach that has worked well in the POWR options portfolio lately. Recent trading in semiconductor pairs – bearish lower-valued WOLF and bullish higher-valued AVGO – closed in one day with gains of 19%.
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What to do?
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All the best!
Tim Biggam
Editor, POWR Options Newsletter
SPY shares closed at $362.79 on Friday, down $-10.41 (-2.79%). Year-to-date, the SPY is down -22.73%, versus a % increase in the benchmark S&P 500 index over the same period.
About the author: Tim Biggam
Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as Market Maker for First Options in Chicago. He appears regularly on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader. Tim is the editor of the POWR options newsletter. Read more about Tim’s background, along with links to his most recent articles.
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