From "Could we bounce?" to "Wow! What a bounce!" in two days.

The SP500 just had two of the biggest back-to-back days ever. 

Nasdaq Dorsey Wright has the stats on some previous occurrences.

Nasdaq Dorsey Wright @DorseyWrightDWA

Back-to-back 2.5%+ days on $SPX are very rare. We saw this near the bottom in 1970, 1974, 1982, 1984, 1987 and 2002. However, this also happened during the craziness of late 2008 and near a market top in 2000.

8:01 PM ∙ Oct 4, 2022

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We’ve been watching the pieces come together (A Look at Mid-Term Election Years) for a week or so. Now here we are looking at a potential change in trend.

That doesn’t mean it was an easy trade. The environment late last week definitely wasn’t conducive to loading up with new long positions. In fact, looking back at Friday’s miserable price action, one may question if anyone in their right mind would've bought heavily as prices broke down and then closed dead on the low.

Good news, missing the turns doesn't matter. Calling the exact bottom or the exact top is not a necessary ingredient for success.  These pivot points are just the first steps in the process of a trend change.

How trends change:

1. Prices stop going down and making new lows

2. Prices get above a previous pivot, making a higher high

3. When prices do turn down (not if, but when) they make a higher low

In the short term, conditions one and two are complete. Now we watch for number three.

When all those steps are confirmed, the trend has changed.

Here are the charts.

$SPY - Things looked a little weak this morning but by about 11:00 AM buyers started to come in, lifting prices into the close. Notice how today's low is very close to last Wednesday's high. There is some potential resistance between 378-380 with the downtrend line and the 21-day EMA. Bullish price action.

$QQQ - Weakened off the open as well, trading below the 8-day EMA. But the midday and afternoon buying lifted prices above the downtrend line and close to the 21-day EMA. Bullish price action.

$IWM - Small caps moved in the complete range between the 8 and 21-day EMAs but ultimately closed near highs of the day. Bullish price action.

If this strength can hold up $SPY 390, $QQQ 290, and $IWM 180 could be in reach soon.

And in case you’re feeling anxious or antsy, remember this. 👇

Andrew Moss, CMT @Andy__Moss

If you feel like you missed out, or that you didn't get long enough yesterday and today... 🟢Relax 🟢Be patient 🟢Watch for new setups 🔴Don't chase 🔴Don't get FOMO There's always another trade.

10:38 PM ∙ Oct 4, 2022

***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.

Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”) a SEC registered broker/dealer and member of FINRA/SIPC.  All trades placed by Mr. Moss are done through T3TG.

Statements in this article represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.   

It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed.  This may reflect the financial or other circumstances of the individual or it may reflect some other consideration.  Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.

All investments are subject to risk of loss, which you should consider in making any investment decisions.  Readers of this article should consult with their financial advisors, attorneys, accountants or other qualified investors prior to making any investment decision.   

POSITION DISCLOSURE

Long: SPY 1021P350, F, MSFT, NFLX, NFLX 1021C260, SOXL

Short: SPY1021P330, NFLX 1021C285

Options symbols are denoted as follows:

Ticker, Date, Call/Put, Strike Price

Example: VXX1218C30 = VXX 12/18 Call with a $30 strike