Happy October!I think I have been around for... 3 Octobers so far? Probably, and each time I always do a themed post! Since October is my favourite time of the year.
October also marks the beginning of the end. The end of a trading year at the end of this new quarter. And in the interest of going all out with different October themes and providing you with information into the year end, I suspect this will be a lengthy post, not simply talking about what to expect for October, but also talking about the bigger picture into the end of the year and trading year.
I guess we can break it down, we can break it down to the short term, next week, the month then the EOY.
The Short Term
The short term (i.e. next week) is, again, looking bullish. Expect some downside days, but just generally look for bullishness. Momentum is lacking. Ironically we are experiencing price action I call "Zombie Buying". Most call it "grinding" but its zombie buying.
What that means is, there is 0 momentum, low volume, but 0 reason to sell. So we have small buyers, like retail, buying because, well, there is nothing else to do, and so we get a slow and painful grind up. Its mindless buying, for no reason, so hence why I call it "zombie buying".
You can see volume, while steady, has been lackluster.
Its more than likely we will see bearishness at points next week. Outlook is more bearish on QQQ for Monday than SPY, so SPY may end up just grinding and trying to move higher, while QQQ sees a bit of a sell. But the motto remains to buy the dip.
The immediate target for next week is a move back to 569.29.
If we take a look at the last week's worth of Volume nodes:
Those are our top POCs/volume zones that you can look for from last week's trading, with the lowest being at 568.68, which would serve as an ideal pullback zone.
The best fit forecasted high for SPY next week is 577.60, assuming a bullish bias.
And for the low its 563.62 assuming a bearish bias.
The Larger Outlook, Month and EOY
So, as we are in a new quarter, we have some new high probability targets.
We still need to see 585 into EOY. 585 is actually the quarter point forecast, so that is great news!
However, with the new quarter, we now have a bit of a bearish high prob on SPX as well:
5,657 is the SPX target. We have yet to hit it, so if we don't pullback into next week enough to remove it, and we run up to the 585 first, it will make for a nice pullback play towards EOY.
If we run an ARIMA on SPX (Because I don't want to disrupt my SPY art already haha):
The point forecast for SPX, over the next 75 ish trading days into EOY, is 6,232. This is a price of around 621 on SPY.
Do I think it goes that high?
Probably not, especailly with the lack of momentum we are seeing come in. But it is possible. With the gains SPY has already made, its hard to see how much more they push it on a Santa Rally, but I think anticipation of the low 600s, to 600 is not impossible.
Its interesting as well because if we go back to my beggining of year post for SPY, these were the ARIMA results:
80% Confidence that the true high of SPY next year will fall BELOW 591.
95% Confidence that the true high of SPY next year will fall BELOW 633.
80% Confidence that the true low of SPY next year will fall ABOVE 433.
95% confidence that the true low of SPY next year will fall ABOVE 391.
So we knew as early as January that 600s were in the realm of possibility this year.
591 is something I do anticipate seeing at this point.
So what is the answer for the "longer term"?
I don't see any downturn starting before next year. And by downturn I mean bear market, correction, whatever you want to call it. I just don't see it happening until next year.
The immediate anticipation is the move to 585. From there, perhaps we grind up on the Santa rally to 591 and potentially 600 to snag closer to the 95% range.
This would be enough to cause a correction/pullback, if not just another 10% crash.
The outlook for next year will remain to be assessed closer to that point. As of now, these are the targets I would be watching. Downside targets remain inconsequential at this point, imo.
I guess that's it!
Safe trades everyone and Happy October!!
