Chris
Engineer & Entrepreneur, Equity/Crypto Swing Trader, Macro & Trade Setups
US equities want to go higher off extreme pessimism. The wall of worry reached DEFCON 1 levels over the past several weeks and the Fear & Greed Index dipped into Extreme Fear, leaving opportunity across beaten-down growth stocks and crypto. If the Iran conflict de-escalates at any point, this is about as strong a setup as any since late March. x.comÂ
US equities offer favorable risk-reward for adding long exposure now that volatility is elevated above 30 and starting to unwind. The VIX has been getting smoked over the past couple of days, and strong bounces across the S&P 500, Nasdaq 100 and Russell 2000 are the expected result. x.comÂ
Extreme fear suggests the SPDR S&P 500 ETF Trust is closer to a local bottom than a local top. The Fear and Greed index reads 22, VIX is at 18, and the fund is only 2% below its all-time high. x.comÂ
SPY's current pullback looks brief because whale accumulation remains above the level associated with mid-term trend continuation. The reading is 87.74%; it fell below 80% before both recent major crashes. Barring a black-swan event or major unexpected fundamental shift, this decline looks closer to earlier minor corrections. The stock market still has significant upside, and fear-driven discounts remain opportunities. x.com x.comÂ
QQQ's remaining earnings, macro and election hurdles set up one more dip to punish late chasers. The index looks good and is pricing in some good news today, but Amazon, Intel and SanDisk earnings plus PCE and GDP arrive tomorrow, followed by AMD earnings and elections Tuesday. Expect one more, probably modest, dip Wednesday or Thursday next week before November's upward seasonality takes effect. x.comÂ
Geopolitical risk is mostly a buying opportunity for US large-cap equities, because fear overshoots and then relief overshoots. The market priced in war for two months, then the S&P 500 rose 3.6% in a week once a US-Iran ceasefire landed. Retail investors who sell into fear miss the relief; the position held through the noise is the one that pays. x.com x.comÂ
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more
Uncertain AI-capex profits and higher oil costs from Iran still threaten US stocks. The SPCX-Nvidia deal brought much-needed overnight inflows to chips and is shifting sentiment, but tech's waterfall decline will not heal with a sharp V-bottom. Be prepared for a big fade. x.comÂ
Extreme fear and bearish sentiment support a rally in US stocks after the correction. BozoHero reports that CNN's fear-and-greed index hit extreme fear four times in 52 weeks without reaching extreme greed. Per simple_setups, VIX spiked over 35% in a day and AAII bears exceeded 40% for most of the past six weeks. The Nasdaq Composite is likely to fill its 26,200 gap and could reach 26,000, a 6% correction, before moving higher. x.com x.com x.comÂ
The Iran war, rising oil prices and inflationary pressure do not yet look severe enough to trigger a major economic crisis. Despite some deterioration in the macro picture and short-term volatility, the broader picture remains relatively healthy and the long-term outlook for US large-cap and Nasdaq 100 stocks is very positive. x.comÂ
Short dealer gamma could amplify SPY and QQQ selling as liquidity drains. SPY's first long-gamma strike is 745 next week, a possible magnet; QQQ has no long-gamma floor in frame, with vanna near 700. A bottom looks likelier next week than this week, with chop between. When strength returns, probably late October, easing should flood equities sooner than most expect: a strong November, stronger December and a Santa rally, with high beta leading into year-end. Its early hourly turn could reverse. … Show more
Anthropic's S-1 and @UncleAlpha007's claim that Microsoft is growing despite a 27% headcount cut have turned the near-term tech-equity view bullish. At least a tradable rally is expected; further upside depends on Iran developments and PCE. Stay nimble. x.com x.comÂ
