Hold On Tight!

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“Awareness is the greatest agent for change.” Eckhart Tolle

Mean Reversion In Play

Last Monday Oct 28th, I posted to clients that I saw a "reversion to mean" trade in SPX to $5730 & NVDA $136.

Both overshot to the downside after gapping down Thursday, but closed the week Friday pretty much on the mark.

I was able to make that call because I track breadth closely for clients in my live trading room - across chase, swing & trend timeframes.
It was clear that as of Monday October 21st, breadth and selling started at 11AM ET and have not stopped falling.
It has been very gradual, not sudden. That's the good news.

But what that means to me is that even as indices chopped sideways two weeks ago, there was a small air pocket of risk forming that would be filled in time.
Calling for a reversion to the 10W EMA is just my go-to, and price absolutely went there - for SPX, QQQ, IWM & DIA last week.

This was helped when Friday Atlanta Fed dropped their GDP estimates A LOT (from 3.4% to 2.3%), at the same time the 30Y-3M yield curve disinverted (warned live). That caused a very surprising sell-off in bonds, which was quickly reversed today as the 10Y got rejected at 4.36% - monthly resistance!

This Monday morning to clients I said:

• Election Risk/Reward: Leaning Negative

• FOMC Risk/Reward: Leaning Positive

I mean, a bearish engulfing weekly candle for QQQ and VIX in backwardation... is not a great way to start an historic week!
Then this morning, NVDA getting added to the Dow couldn't even get the market excited!

I led my trading room pre-market today with some downside price targets for the week: