Buyers hit the pre-market and opening hard, but thus far it has proven to be a mistake. We've faded beyond overnight lows in technology, but the S&P 500 has been able to hold lows. Our job is to determine what will lead: the Nasdaq or the S&P 500? I have nothing against small-caps, but in front of the election and in the midst of earnings season, I simply don't think the strength in that area will reverse the weight of the Nasdaq. No, that strength needs to come from within. The S&P 500 has enough cross-components with the Nasdaq 100 that it could help stem the blood flow, which is why we need to watch both.
Friday morning's action running to around 11 am EST should help us determine chop, trend, or reversal potentials. Bulls certainly do not want to see this turn into a trend day lower. The technical picture is already ugly, markets generally don't love to bottom on Fridays, and we're heading into the election finale on Tuesday, so we know headline risk will be all over the place this weekend. Toss in lots more Covid chatter (cases up, but not much mention on deaths and hospitalization rates), and we have the makings for a very scary Halloween weekend.
Today might be the day to toss out some low numbers where you might like to buy a stock. I would repeat those entries through Tuesday or Wednesday. I'm not talking flash crash numbers as I don't see us in that type of a situation, but I can see tossing out some bids 10% or 15% below some current valuations. Maybe an Apple (AAPL) $95 bid or $100 if you want to be more aggressive. A Tesla (TSLA) $320 bid. If it works for $420, then why not $320? Target (TGT) around $137.50 to $142.50, or Walmart (WMT) around $128.
The idea is to seek out levels from July or August in those examples but you can absolutely go lower. If you don't get hit between today and Tuesday, so what? The only risks are either you need the buying power and don't have (just cancel the order to correct that) or you do get hit but the stock continues lower. In short, you have to be willing to buy and be comfortable with the price.
I am seeing a lot of names break their 50-day simple moving average (SMA) or trade below that level for a third or fourth day in a row now. Bob Byrne and I have a saying: "Bad things happen under the 50-day moving average." Consider that when making decisions on what to hedge, what to cut, and what to buy. I continue my cautious stance, but believe now the downside for something like the Nasdaq 100 (QQQ) may only be 3% to 4% from the current $270 price, so I am getting closer to making more aggressive buys. I will continue to use calls or call spreads though to define my risk because being wrong, especially under the 50-day SMA, can get very painful, very quickly.