• Hello, everyone, and welcome to Monday morning. .
• It's Stephen Whiteside here from theuptrend.com. .
• In the pre-market this morning, stock .
• index futures are trading right around fair value. .
• So far, it looks like we're going to have a fairly quiet open. .
• Commodities are mixed with crude oil .
• higher while gold is down in the pre-market on Monday morning. .
• Now, last week was a historically volatile .
• week for the market, and luckily enough, it was to the upside. .
• I thought we'd do a little recap of how we got here this morning. .
• Remember, we were back in August, we were .
• looking for buying into the middle of September, looking at the seasonality .
• chart of the TSX, and then some selling into October. .
• From the October low, we were looking for .
• a move up into November, which would hopefully lead to a year-end rally. .
• Now, October is a very spooky month for the stock market. .
• Some of the biggest declines in history have happened in October. .
• You find a lot of people on edge during the month of October. .
• Now, a week ago, we were still watching .
• the same movie, which was lower highs and lower lows. .
• That had not changed. .
• A week ago, I asked you to lock in profits on short positions, whether you were short .
• stocks or long-bear ETFs, just to make sure you had already done that. .
• From that point on, the market moved higher. .
• Why did I tell you to lock in profits down at that level? .
• Well, we were very oversold at the time down at the bottom of the Panic Zones. .
• We were coming into a weekend that had a full moon. .
• We were also coming into month end. .
• You don't want to trade against that month end of the money. .
• We were also coming into November first. .
• Now, November first is significant because .
• that's when the sell in May crowd comes back. .
• If traditionally people who are selling in May, they come back on November first or .
• around that date, depending on the calendar. .
• Of course, we don't want to trade against those people if they come back and think .
• this is the time and place to get back into the market. .
• Now, for six weeks, we were constantly talking about market fear. .
• The reason for that was that we had the VIX on a weekly buy signal. .
• Of course, when the VIX is rising, we know that portfolio managers are willing to pay .
• higher prices for portfolio insurance using options. .
• For six weeks, we were expecting lower stock prices. .
• Last week, what happened? .
• Well, things turned around sharply. .
• Now, when the VIX is elevated, the least you should be doing is just stop buying .
• and stop looking for buying opportunities in the market because you know the .
• probabilities are that the market is going to go down. .
• Now, if we look at the seasonality of the VIX, you can see that it usually peaks in .
• October and then starts to come down coming into year end. .
• And so it is this trend in the VIX to come down over the next month or so is what .
• helps fuel the stock market rally into the year end. .
• So now that we've got the VIX back on a .
• weekly sell signal, we're going to go from being long term bearish to long term .
• bullish on the market and we'll continue to be long term bullish .
• on the market as long as the VIX continues to close below $19.50 this coming Friday. .
• Now, if you're trading the market on Monday, we're going to remain short term .
• bullish on the market as long as the VIX doesn't close above $19.81 on Monday. .
• You can see that that upper channel line is starting to point down and is going to .
• continue to move lower daily until we do close above that upper channel line. .
• Now, we've been talking about a range .
• bound market and we were talking about the TSX. .
• If we go back a month, you can see the TSX was trading in a tight range and we were .
• looking to see if the TSX could hold support at 19,375. .
• If that wasn't the case, then we would .
• expect it to come back down to our next price target at 18,750. .
• Move ahead a month and you can see over .
• the past two weeks, we've been holding support at the 18,750 level. .
• Last week, we completely reversed and started to head back up. .
• That's what price targets are for. .
• They're not only for resistance, but .
• they're also for potential areas of support. .
• And of course, if you were short the market, you would be wanting to take some .
• money off the table down at a price target like that. .
• Now, we're also looking at the Russell .
• 2,000, which was range bound for much longer than the TSX. .
• And we were looking to see if it would break out above 200 or break down below 16 .
• 2.50. A month ago, we were looking to see if it was going to hold the 175 level. .
• If it didn't, we were expecting to find support at the 162.50 level. .
• And that's exactly what happened. .
• We came down for two weeks. .
• We used 162.50 as support. .
• And last week, we headed back up. .
• Our next price target is 175, and we landed at 174.49 on Friday. .
• So it looks like the movie might start to change. .
• We've got the remote control away from the cat, and we might be changing from lower .
• highs and lower lows to maybe higher highs and higher lows. .
• And that's what we're looking for. .
• We want the year end rally to start. .
• Now, I mentioned last week that I thought the rally was based on short covering. .
• And at the end of the day, it really doesn't matter. .
• When the market goes up, it goes up and it affects everybody equally. .
• And that's what happened last week, short covering. .
• That's why it was so sharp and so fast, .
• because what happens is that people get sucked in. .
• When they see the market trading down at .
• these levels, they just think it's going to continue to move lower. .
• There's nothing wrong with going short, but you're going short at the wrong time. .
• We want to be shorting off the top, off .
• the start of the trend to the downside, not at the end, but it is at the end where .
• people get emotionally involved in taking a short position. .
• And that mistake of getting in at the last minute is what causes shortcoming rallies .
• to be so quick because the people who shorted down here have no profits in the .
• trade and have to get out as quickly as possible. .
• Now, nothing's guaranteed. .
• The fact that the seasonality has changed, the fact that we've come off lower lows .
• and moved up sharply, nothing's guaranteed. .
• We just have to work with what we've got. .
• What we've got is a lot of resistance to the upside. .
• If you've been watching our videos SPY, our next resistance is at 437.50, and then .
• just above that is the top of an open gap that hasn't been filled yet. .
• That's a potential wall for the market to have to climb over. .
• Now for the triple QQQ's, .
• 367.19, that was resistance, and we traded up and closed just above that on Friday. .
• Our next target is the October high. .
• Then looking at the Russell 2.000, our .
• next target was 1.75, and we peaked out in October just above that level. .
• That's going to be an important area of resistance to get over. .
• Now, the iShares for the TSX 60 actually .
• started to trade above the October highs on Friday. .
• You can see just above that, not only do .
• we have a price target of 30, 47, but we have an open gap to deal with. .
• It could act as a price magnet to pull us .
• up and it could act as an area of resistance. .
• Now, probably the most important chart to watch this week is Apple. .
• Apple did not get hit hard during the month of October. .
• It held up very well. .
• It had very weak earnings out last week and did not get hit hard to the downside. .
• And so we're looking to see if Apple, the most broadly held stock in the world, if .
• it can hold and maintain a buy signal at this time, that should be supportive for .
• the overall market to continue to move higher from here. .
• So on Monday, we're looking for Apple to .
• not close below $170.74, and hopefully, it will continue to move higher this week. .
• Okay, folks, that is all for this morning's presentation. .
• We've got to go from being overly bearish to being overly bullish. .
• We have to wait and see if the market can .
• continue to break out above resistance and if we can start to change the movie .
• script from lower highs and lower lows to higher highs and higher lows. .
• Enjoy the rest of the day. .
• Next time you'll hear my voice is on Tuesday morning. .