Stocks pushed higher on October 1, but are getting close to the beginning of the next leg down.

Stocks May Be Setting Up For Their Next Leg Lower

October 1, 2020

STOCKS – AMZN, AAPL, DIS, SQ, DOCU

Macro – SPY, QQQ

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Sorry about missing this morning. I had a write-up nearly complete, but then my 10-week old Golden puppy decided to try to chew the corner of the screen, and well, the story was gone. That is the one problem with having touch screen laptops. Babies and dogs seem to have a way of making work disappear with the slightest of touches. 

It happens…

S&P 500 (SPY)

Anyway, going through my daily charts today, I notice a rather remarkable pattern forming off the S&P 500 and NDX futures. A rising wedge or bear pennant starting. The bear flag in the S&P 500 appears to be essentially the same as the one formed at the beginning of September.  It is about as bearish of a pattern one can get, couple that with what appears to be extreme resistance at roughly 3,415ish, and the S&P 500 might have found this mini-rally is near its end. 

NASDAQ 100 (QQQ)

The pennant isn’t as nicely packaged on the Nasdaq 100. Regardless the rising wedge pattern is present, and that in itself is bearish. I’m not projecting yet how far of a decline it could be, but guesstimate currently is about 6ish%, probably worse. 

Amazon (AMZN)

Amazon has the same pattern, and if that is the case, then a drop back to that $2,800-2900 region is likely just the first stop for the stock. 

Apple (AAPL)

Apple has a rising wedge in it as well, and that stock is likely to revisit its September lows. 

Disney (DIS)

Disney is very close to breaking down, with it sitting on an uptrend at $123. Once it breaks, I expect it to fill the gap down at $114. 

DocuSign (DOCU)

Interesting pattern on Docusign. I have been waiting for this one to break $188.50. I think it will, maybe on this upcoming drawdown. It a rising wedge pattern, by the way. 

Square (SQ)

Square has a bearish divergence with the RSI trending lower, and the stock rising. I think the stock is nearly finished rising though, with a potential double top pattern forming, or a failure at resistance around $180 at the trend line. 

Have a good one

-Mike

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