Tuesday, October 18, 2022

Market Update Technical Tuesday 10/18/22 - The Big Reveal


Like I said in yesterday's update, I liked where stocks closed on Friday, and that set up for another big rally on Monday.   

To Recap: 

 1. Thursday we saw a big rally in US stocks 

2. Friday, we got a pull back to a higher recent low. That's bullish. 

3. Monday, we saw money put to work, which is exactly what one would expect, going into a new quarter, ahead of an election. 

4. Today Tuesday - we're seeing a continuing relief rally overseas, carry over into US equities.

a. The "U-Turn" on Truss's economic plan. 

b. The delay on the release of China's lousy GDP numbers 

That's all the catalyst you need for a relief rally, but we could add the fact that not even $MS wants to be short US equities going into October OPEX (options expiration), as short bets have already reached extremes, and point to capitulation, in US markets. 

We're also in earning season which is one of the catalyst.... I correctly identified last week. 

Of course everyone on Wall Street seems to be on board, with this rally, and is throwing money at it, so let's call this "the Morgan Stanley Rally".  

You can get the full story right here, without having to pay for CNBC Plus:

Morgan Stanley's Wilson Finally Turns More Positive, Sees Stocks Rallying in Near Term streetinsider.com

CNBC Publishes the target; in the next headline, and that's all you need...: 

Morgan Stanley’s Mike Wilson sees a bear market rally that can lead to an 11% gain from here cnbc

Of course if you were listening to the idiots on CNBC, and Bloomberg, yesterday, they would tell you that the market sold off hard on Friday, and Monday was the reversal. 

It can get very confusing listening to 12 different financial news outlets report 12 different stories, and 90% of what is being reported is absolutely wrong, or downright deceptive, and the fact that some of these outlets expect you to pay for a subscription, is laughable!  

To cut through the BS: 

Morgan Stanley covered their shorts bets, and is calling for a relief rally, back to the 4150 level. 

Of course I don't agree with Morgan's strategist on everything, but I'm down with this rally, since I called it first.

 I've even drawn up a new chart, and added it to the Public Charts Area!  


$SPX - Morgan Stanley Chart - Obvious target is the 200 day ma. 

Wait, isn't that the target, I've been pointing to for several weeks, now? uh, yeah 

Does this mean we're out of the woods? Not Quite... 

I think there's a good chance energy crashes, and were likely to see some giveback in certain European markets, and that may spill over into US markets. 

I took some profits in a couple sectors yesterday, and will probably do so again today, and we haven't even tested the  resistance level I pointed to in Friday's update


Seems like every day, I hear the same argument about the energy sector, as if energy is somehow undervalued, as compared to Oil prices? 

1. Look, Oil is trading nearly 30% of the March high, yet Energy stocks continue to trade near all time highs. This makes absolutely no sense. 

2. We continue to see extreme bullishness in the energy sector, even though it is trading at lower highs - for the year. That is a huge red flag, because this describes exactly what a suckers rally in wave 2 looks like. 

3. Energy continues to rally in the face of massive losses in nearly every other sector. Are we supposed to believe we're pricing in a recession, in Technology stocks, but not energy stocks? FOOLS! 

 For Example: $FANG Diamond Back Energy    

Take Care, AA   

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