Capital Wave Forecast: The Bulls Are Trying to Breakout: They’re Almost There

Shah Gilani|October 5, 2020

The Dow rose 508 points, or 1.9% last week. The S&P 500 rose 1.5%. And the Nasdaq Composite rose the same 1.5%.

That’s what I call a bullish week, not because it was a rah, rah run for the high ground kind of week, simply because we ended the week up when we easily could have slid backwards.

We rose on uneventful volume, to be sure, but we rose.

Proof that it was a good week and that bulls are ready to breakout of their corral and maybe stampede higher was especially evident on Friday. After futures pointed to a hellish day ahead, on the heels of the President seen headed for the hospital on Thursday, once the market opened, buyers came in.

It wasn’t a “good” day Friday, but it easily could have been an ugly day. Instead, we saw how willing buyers were to come in and take their shots. That’s bullish.

The bond market even gave a nod to rising stocks, selling down on the week, leaving the 10-year Treasury yield a little higher at 0.70%.

Bulls are looking at better than expected consumer confidence numbers, better than expected PMI numbers, equity benchmarks bouncing off their 50-day moving averages and recovering from the quick September tumble they took.

And they like what they see.

Traders don’t seem to care about the anticipated “contested” election. They don’t seem to care if Trump loses, or Biden loses.

They just seem to be looking to the other side of the election, anticipating stimulus, anticipating fiscal spending, anticipating a V-shaped economic recovery.

Maybe they’re just bullish on getting on with their lives, getting back to a semblance of normalcy.

That’s the way it looks. And I’m starting to look that way too. But I’m not all the way there yet.

We’re seeing virus spikes around the world and may we’ll see some serious ones here, before the election.

If that happens, investors might get nervous about the economic recovery and take some more profits.

We’re seeing more jobs being cut with Disney’s laying off 28,000 workers, Boeing’s laying off 19,000, airlines laying off tens of thousands of workers.

But bullish investors are looking at those layoffs as companies cutting overhead for the future.

The unemployment rate fell to 7.9% from 8.2% a month ago. But that’s because 5.2 million people are now “not looking for work,” meaning they’re out of the labor force. That’s how we got a lower unemployment number.

But bulls didn’t look at any of those numbers, they just saw 7.9% vs. 8.2 % and cheered.

Investors seem to be looking past any negatives and are buying, that’s what’s moving markets.

Bulls have the floor, and they’re mopping up the bears with their buy-this-dip mentality.

Don’t stand in their way.

The Dow’s got resistance between 28,000-28,330; if it gets above there, as scary as it will look, it might worth buying into, with tight stops for sure.

The S&P 500’s got resistance at and between 3,400-3,430. The Nasdaq Composite’s got resistance between 11,300 and 11,350.

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If the bulls can take the benchmarks above these resistance levels, there’s more to go on the upside.

It doesn’t matter that it looks overdone to me, what matters is whether more buyers of this dip will come in once the dip’s been rounded higher, and whether retail traders can draw in institutional investors on their heels, or if they bump against hard realities and take profits again.

Be careful out there.

Until then,

Shah