• SPY stages the perfect dead cat bounce on Friday.
  • SPY closes a tumultuous week over 1% higher at $434.24.
  • Stocks remain bearish and further losses are in the cards.

Investors will clearly be glad to see the back of last week despite a positive tone on Friday. The market was due a dead cat bounce, and that is exactly what we got with a meek move to end the week and perhaps some shorts taking profits. The overall tone among equity players remains negative, with a host of headwinds lining up to be used as an excuse for the latest losses. As we have mentioned many times here at FXStreet, the narrative will be shaped after the fact to meet the price action. The market will do what it wants to and ignore data or fundamentals many times over. This correction was long overdue and comes as numerous shorts have been squeezed with a slow and steady grind higher for most of the summer. Now that many shorts have given up, it was a perfect time then to actually go short. 

SPY 15 minute

SPY stock forecast

October is a spooky time for investors (ok, bad Halloween pun), but it is the most volatilie month historically for stock market swings. Buckle up and ride it out! September was one of the worst months since the pandemic began, so this could be the start of a new trend, which we have been calling since the lower low back on September 20. The trend channel identified below is intact. The SPY is trading below the 9-day moving average, and the momentum indicators are all trending lower with price. We stick with the bearish call so long as the SPY remains below $443. 

Our call from before the open on Friday worked out nicely, thank you very much: “$434 to $436 is much of the recent volume as we can see the volume profile bars are large here on the 15-minute chart below. This is short-term resistance.” Friday’s high was $436.03. Sorry, we missed it by 3 cents! We would like to see $427 broken reasonably quickly to avoid the appearance of a double bottom. Also below $428 volume thins out, meaning we would expect a quick move to $415. This is our buy-the-dip zone with a huge volume profile and the yearly Volume Weighted Average Price (VWAP) and 200-day moving average at $413 to $415.