October volatility
Developments in the crypto market remain almost unchanged from the past weeks, while on the contrary, stock exchanges have reached an important short-term turning point.
Therefore, today we will discuss this short-term trend of the US stock market by analyzing the chart of the S&P500.
The S&P500 has completed a bearish head and shoulders formation, breaking the support (in jargon: neckline) of this formation, placed around 4300 points (black line).
From this point on, the index, which broke the 50 day moving average (blue curve) a few days ago, could fall to the 200 day moving average (red curve) around 4200 points.
During this descent, traders will continue to move capital from high-tech stocks, biotech, utilities and real estate to the stocks of the moment, which are obviously energy, but also some financial stocks and those related to industrial materials.
Our indicator based on high-yield corporate bonds is approaching the dotted line. Presumably, even if it breaks it, the trend should then reverse to the upside. Low risk corporate bonds are already bouncing on the support line.
One must also consider that next week many derivatives based on the VIX will expire.
So next week could be the peak of this market weakness.
CONCLUSION
In conclusion, I suggest to take advantage of this volatility with short term trades (futures and options with maximum expiration in October-November).
Many traders, for example, are positioning themselves with these leveraged instruments in sectors favored by high rates (energy, industrial, financial) or are shorting unfavorable sectors (technology, real estate etc.).
Among other things, this increases short-term volatility.
On the other hand, portfolios composed of ETFs or stocks should not be repositioned towards short-term "winning" sectors, because one would then be forced to liquidate the positions after a couple of months without having gained much.
In the medium term, the trend of technology remains bullish, while in the long term, especially after this phase of illusory increase in rates, it remains super bullish...
Thanks for reading.
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