The Next Leg Lower For Stocks May Have Started Without A Stimulus Deal

The Next Leg Lower For Stocks May Have Started Without A Stimulus Deal

October 6, 2020

STOCKS – AMZN, FB, BA, DOCU

Macro – SPY, QQQ

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Stocks fell hard today after President Trump decided to stop negotiations on a stimulus. It should be no surprise; it seemed like an impossible task to get done a month before an election. But clearly, the market was pricing in a stimulus; you saw it in the bond market and the dollar, as well as equity prices. So this will lead to an unwind of those moves.

Dollar Index (UUP)

The dollar index jumped sharply following the news, and with the ECB’s focus on the euro currency, it seems that it may only be a matter of time until the dollar’s moves to higher levels.

10-Year

We also saw the 10-year fail at resistance, turn lower on the news, and is likely heading back 63 bps.

S&P 500 (SPY)

The S&P 500 got to resistance at 3,425, and just when it looked like it might break higher, the news hit the Twitter feed, and the algo’s flipped. We fell right through the lower trend line of the bear flag, and we managed to see the re-test of that break down right away. It suggests that the next level we should be watching for is around 3,340, and probably the September lows around 3,220 after that.

NASDAQ 100 (QQQ)

The Qs fell out of their bear flag today as well and back to support at $274.30. I wouldn’t be surprised if we fell back to $264 over the next few days.

Amazon (AMZN)

Amazon fell pretty hard, too, dropping to below $3,100. Again, it had the same pattern as the indexes, so the decline doesn’t surprise. The next stop is likely $3,000.

Boeing (BA)

Boeing said it expects sales of its plane to be hurt for more than a decade. I’m surprised the stock hasn’t gone to even lower levels. It probably revisits $145, but why couldn’t go even lower, like the $120’s?

Facebook (FB)

If Facebook breaks $245, one could almost argue that it has formed a head and shoulder pattern. That would not be good for the stock.

DocuSign (DOCU)

I really would love to see Docusign break already. The stock’s valuation is beyond insane, and that RSI keeps going lower and lower. There is that little uptrend that needs to go; then, we can retest $190.

-Mike

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