What's going on in the market?
The market has been on a bullish run ever since it broke out of the wedge pattern. It briefly made new all-time highs on Friday, October 22, 2021. The new all-time highs were short-lived as investors awaited Powell's speech on stimulus tapering. As I previously mentioned, stimulus tapering might put a dent in the market's breakout. Whether the tapering effect will be temporary or not remains to be seen.
Where is the market headed now?
As soon as the tapering news came out, the market started to dip as fear set into the trading and investing communities. Prices took a dive from all-time highs of $454.67 to a low-of-day at $451.05. The price recovered swiftly in mid-day trading to $454.08 and then came back down gradually in the afternoon hours. Friday's trading action formed a Doji candle typically known as an indecision candle. This means that investors are undecided where the market should go next. It is my opinion that the market will experience a pullback in the coming weeks until the tapering news takes effect sometime in mid-November. After that, the market will more than likely be on a week-by-week basis on jobless claims and inflation reports which seem to be the talk around the markets.
Friday, October 22, 2021- S&P 500 trading action in a 1-day 3-minute time frame chart (figure below).
**regular trading hours are indicated by the black zone.
Doji Candle: Friday, October 22, 2021- S&P 500 trading action in 1-year 1-day time frame chart (figure below)
What else can affect the market?
It is also important to note that this week's earnings reports from some of the biggest companies will affect the market's outlook and direction. Earning from Apple (AAPL), Microsoft (MSFT), Google (GOOG) (GOOGL), Advanced Micro Devices (AMD), McDonald's (MCD), Boeing (BA), Coca-Cola (KO), among others will have a major impact on the markets. It is almost obvious to say that good earnings reports will bode well for the market and vice versa.
What does the tapering news mean?
The tapering news means that the government will start trimming down stimulus checks sent out to the general population. The stimulus checks help pump money into the economy for sustainability and growth. It's the reason that the market has been able to withstand tough pandemic economic turmoil and maintain its bullish momentum. In turn, with the tapering taking effect, the market will no longer have that economic stimulus and will be relying on people going back to work.
With people back at work, then what?
With people back at work we will begin to see better jobless claims reports, supply bottlenecks will begin to loosen up nationwide (worldwide supply bottlenecks depend on their own governments), all of these measures will ensure continued economic recovery. Not to mention the possibility of full reopenings in many sectors of the economy such as travel, entertainment venues, food industry, etc.
What's the fallout of people back at work?
In my opinion, one major fallout is the possibility of Covid-19 variants continuing to spread but, with most companies requiring vaccines and having proper safety measures in place, there is no reason for it not to be a success.
by Jose Navarro on October 24, 2021
**This newsletter is intended for educational and entertainment purposes only. Pennystocksclub13 intends to educate beginner traders with easily accessible and simplified information to shorten the learning curb. Traders should always do their due diligence and continue educating themselves about the risks involved with trading.
All charts courtesy of Thinkorswim platform. Pennystocksclub13 is not affiliated withThinkorswim.
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