The Market Coiling for a Big Move

The Market Coiling for a Big Move

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Hi, folks! Welcome to today’s Rude Awakening.

Let’s dig into what’s going on in the markets…

A Small But Crucial Cross

Looking at yesterday’s market action, you can see a small cross of two very important lines on the S&P…

IMG 1

That top line is of course the 50day MA.

If we stay below it, it’s a bearish indicator.

But if we can push above and stay above it for a few days, it’s a bullish indicator.

We’re hovering right above it now.

But, what’s even more important in that image above is the tiny candlestick all the way to the right, demonstrating yesterday’s full market action at a glance.

It’s called a doji. It’s named from a Japanese word that means “indecision.”

What we can take away from this is, it looks like the market is coiling…

Last Night’s Debate Effect on the Market

The doji doesn’t tell us which direction the market is about to shoot in, but it does tell us the market is poised for a move.

Looking at the overnight futures, the market did not like last night’s presidential debate.

Focusing on the chart, as the debate was starting, the futures ramped up, and as it went on, they had a massive sell off — a 200 point downward move.

Markets hate chaos and uncertainty. They want stability and assurance. And last night’s debate gave us anything but clarity on what’s to come in November.

The Market Is Looking for a Direction

Like we keep talking about, the market is trying to push above that 50day MA, but to have a significant change in direction, up or down, there has to be some stability in the world to latch onto.

We got GDP numbers this morning, showing Q2 GDP is down 31.4%.

Now, that sounds bad, but it’s better than expectations. And, we’re expecting a huge rebound in Q3 GDP numbers.

It looks like we are in a V-pattern, a rebound in the marketplace.

So, what can that mean for us traders right now?

An Interesting Trading Vehicle

TLT is the iShares trust that tracks the 20-year US Treasury Bond.

As you may know, there is an inverse relationship between bond pricing and bond yields.

When yields drop, bond prices rise.

When yields rise, bond prices drop.

Going back to March, excusing the covid impact that hit that month, we are basically at all-time highs in TLT. This is because yields are, of course, at all-time lows.

So, to find out about our non-correlated trade on the 20+ Year Treasury Bond ETF (TLT), click here to sign up for the free beta test of the Rude Awakening Pro.

It’s getting close, folks, but there’s still time to be one of the LAST people to sign up for free lifetime access to this premium service…

That’s it for today.

We’ll talk again tomorrow…

Regards,

Scott Stewart

Scott Stewart
Editor, Rude Awakening

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Scott Stewart

Scott Stewart has been trading for decades. He has acted as an analyst and educator on the stock market for just as long. As your Rich Dad's Weekly Cash Flow analyst, Scott works tirelessly to ensure you know everything you need to do when entering into new positions, and adjusting trades as you go along....

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