Market Violently Cycles On ‘Deal Or No Deal’

2020-10-22

A constant state of anxious anticipation in the market is causing traders to continually search for opportunistic trades.

Wild volatility in the S&P 500 the last 10 days exemplifies the significant uncertainty in the broader market. Wild price action — swings of 20 to 30 points straight up or straight down — presents a slippery slope.

What’s influencing this market?

“Deal or no deal” — whether U.S. politicians can hash out another economic stimulus plan that businesses, consumers, and the market are expecting — is holding sway over the market. Every tweet or tidbit of news related to the stimulus appears to directly affect the market mood.

Directional trading has given way to cautious planning with quick entries and exits. Strategies of “buy the dip” or “buy and hold” are challenging for the steeliest of nerves. Opportunities arise daily, but traders must be more in tune with the market’s violent cycles while being nimble to adapting as needed.

Expectations are that a stimulus deal is coming, one way or another, while the market remains in a state of see-sawing limbo subject to the antics of politicians.

A semblance of stability from the see-saw action this week and next are the earnings reports expected from big tech companies. 

TSLA reported this week with little fanfare and next week key players such as FB, AMZN, and APPL will report. This run through earnings hints there is less possibility of a sudden sell off.

But this year has been anything but predictable overall in the markets and the next few weeks are setting up for more volatility heading into the election. There could be opportunities for cautious traders using more complex setups.

Still, no expectations for placing big bets as the market plows forward while the indexes continue to try and hold support.

We Saw: Another choppy session with an uptick into the close — 

  • TSLA earnings not much of an event
  • Pandering politicians’ banter over stimulus
  • All three indexes enjoying positive gains

We’re Watching: For a calm Friday and no big losses —

  • Gilead’s remdesivir approved for wider use
  • If stimulus optimism translates to rising price action
  • Setups in stronger sectors, indexes