Stock Market Crash in October? Why I Don’t Buy It

[00:00:00] Speaker 1: is a stock market crash about to unfold here in October many investors are thinking it will in the coming weeks and I'm here to deep dive into the technical analysis and data to see if it is supported all right so number one what we have to recognize is that October historically has been when we've seen major crashes and major market declines I want to show this graphic real quick it's a pretty incredible one the month that breaks markets the 1907 panic this is actually what triggered a JP Morgan back in the day to bail out the stock market and ultimately began the Federal Reserve right 1929 Dow falls 89 percent all right then you have 1987 Black Monday 1989 Friday the 13th 1997 down 7.2 percent trading halted and 2008 worst week ever on record down 18 percent this is when Lehman failed panic spreads and everything changed so bottom line is what we know is October tends to be a very violent and potentially negative month and certainly what we've seen thus far has set the possibility in motion we could be on the verge of this but do the charts confirm this do the charts tell us that this is the likely scenario that's what we're going to unfold now before we do that just a reminder here folks if you want to pay 10 bucks a month to get into Gareth's top squad you get a live Q&A I'll be doing one Monday or Tuesday this week exclusive videos just to members of Gareth's top squad I'm going to be doing one today and in that video will be an epic discount 50% off on something at verified investing.com every week I do another coupon code for verified investing.com in addition swing trade alert posts all right on YouTube so you get them right there on YouTube and last week I did one on ASTS just before it snapped back 10% the very next day pretty remarkable trade alert right there and that's all again right here on YouTube if you are interested at 10 bucks a month and also it's a way to support the channel if you like what I do if you like what the people here are creating the the graphics the different things that I'm able to do for you guys then 10 bucks a month does support the channel all right so let's get into it guys let's start out with the Nasdaq here and if we take a look at the Nasdaq the Nasdaq dropping as much as four and a half percent last week ending the week down 2.14 percent and this again was on the back of core weave and the AI trade and what's so interesting about this and this is core weave here and you can see what a nasty week it was I mean just going back to October 6th the stock has dropped 34.34 percent right so 35 percent drawdown in essentially 10 trading days when you look at what Friday's date was to the 6th of October now the kicker here is this and many people don't understand what's going on is that these companies they've taken on so much debt and core weave is the poster child for this and essentially that debt is unsecured meaning that there's nothing backing it it's just like well I hope they make money so that they can pay back this debt and essentially that's what what happens is there's credit default swaps and essentially that's insurance on whether or not they will pay this money back and so think about it like this you're buying the insurance to make sure the company is able to pay it back in the form of a credit default swap now what's been scary here is that last week we saw the premium being charged on a yearly basis to hold that credit default swap or buy that insurance at 15 percent interest rate or 15 percent rate that is astronomically high and it is a warning sign to all of these players that have bought crazy amounts or taken on crazy amounts of debt and that's sending the market into a panic essentially what it's telling you is that more and more insiders are saying that they don't believe these companies will all survive and that a lot of this debt will end up blowing up and being worthless all right so that sent the market into a tailspin core weave obviously the poster child of this but if we take a look at core weave a couple things so down here's a level that i'm looking at but what i thought was interesting here is we did kiss this key technical level on core weave now again like i said if you look and this is by the way kind of a contrarian view is in that many retail like if you go on social media many retail investors are predicting a crash on monday coming right up i'm in the camp that we could gap down but i actually think you'll see a rebound here in that trade number one generally when you see a lot of people predicting something on social media it doesn't come to pass it's very rare that crashes come when retail expects it it's more the other way around when no one expects it that's when something fails right and so i think that's an important aspect in addition these type of moves we're going to see a lot of factors this week and i do think that with the president and the midterms looming the the plunge protection team will be on high alert now many people saying man what's the plunge protection team the plunge protection team was created during the nixon admitted excuse me during the reagan administration and you can look this up but essentially it's it's essentially big banks mega banks and the federal reserve and their job is to not allow massive crashes like the 1987 crash which formulated the plunge protection team or brought it into existence and it's not to say that they won't let the markets go down two or three percent they're not in there to step in every single time the market drops two or three percent because they don't have the funds to do that but they are in there to make sure that if things get crazy like it looks like a crash is going to happen they will come out with bazookas and make sure that it doesn't or at least attempt to make sure that it doesn't so with the midterms and the president in the position that he is it's very unlikely we will see an actual stock market crash before the midterms all right now having said that is it possible we could be down two or three percent again absolutely that's a run-of-the-mill kind of pull back uh to nasty day but historically that's not super unusual in the markets now if we go back to the core weave chart core weave here is telling me that we potentially could open lower tomorrow into this line and then we could actually bounce up here you can see hitting bouncing bouncing kind of kissed it here hit again and hit again slight descending trend line right there and also there's a little bit of a pivot like maybe we gap down i could see a gap down on core weave maybe here to around 54 maybe even touching gap fill at 51 but i'll tell you this i'll be a buyer down here there's no doubt about it if we open down in that range and by the way that would be about a 10 percent decline if we got down to this lower trend line which actually considering core weave was down 12 on friday that would actually be down about the same amount a little less than that to get to those levels all right so again down about 11 12 would get us into this lower range if we were to go here would be about 10 so 10 12 give or take in terms of the decline now if we look at other stocks out there micron has already broken down but it's already come down significantly now again same thing with micron i could see micron maybe retesting here right this 735 level you also have a little bit of a pivot right here at 786 but unlikely it's going to just blow through this low without a short-term bounce now is the longer term on micron broken yes this is a chart that is now broken this is the long term from basically the beginning of the massive run now this this was a nice little bull market right kind of went up then went sideways for a bunch then fell back then it broke out this is the bull run there was your first pullback this was your second and then it broke down and this is a big breakdown right here this tells you that these are likely multi-year highs on micron now it doesn't mean you can't retrace and go back up here but now i'm looking absolutely to be a shorter at these levels all the way up here all right sandisk same thing now sandis what's interesting is this one's actually at technical support so we have to watch and see does this hold but it's actually at support here now going back to the nasdaq let's really look at the nasdaq composite here because this is the one that's going to matter so number one what you have here is an interesting trend line here that has been broken so the nasdaq to me is the one that you have to be more concerned with in terms of has it put in its multi-year high already i actually think it has and i know that might be shocking to many now on the s p i still think there's a little bit of potential for further upside to new all-time highs to about 8 000 which by the way is only about three percent upside so it's not like i think there's a lot of upside in the s p but what we've seen this week is the s p has only went down when nasdaq dropped four and a half percent this week the s p was down basically less than a percent maybe a percent and so what we're seeing is that if the nasdaq bounces the s p likely gets a bigger bounce and can push up and the key in the s p is the diversification if you look at names like i mean heck you could look at um you know names like like clorox i've talked about that one many times with you guys um even like names like nike have performed amazingly well ever since they had those bad earnings it's gone straight up but you can also see like abbv i mean look at some of these names here that are our key s p players and by the way abbv hit a major resistance up here on friday but look at this chart incredible but i actually love this on the short side now which makes sense if tech is going to get a bid maybe this one pulls back the point is again is that the 500 stocks in the s p it's much more diversified versus the nasdaq or the nasdaq 100 that is so concentrated in the tech trade and the ai trade specifically that's the problem there it's the ai trade specifically so again going back to it if we go back to the nasdaq again potential for a little bit more downside here maybe on a gap down but you're going to come right into support right in this range right here in fact this would be first support to watch on monday right around 26 000 if that breaks it does open the doorway to a bigger move down to about 25 000 but what's interesting is if we go to the s p 500 here the s p 500 we have our resistance this is kind of my max bull bull market upside and it's just proven itself over and over again rejecting seeing price getting rejected so again what we can see here if we go here from our all-time highs look at this we're down two percent off the all-time highs on the s p that's with just this week the nasdaq being down i think the nasdaq's down from its all-time highs at least the nasdaq 100 is down about eight percent but the idea being is that number one we're still in an uptrend on this and you could still see that the s p has kind of a bullish flag pattern putting in being put in right here right up move inside bar now again if we were to break below this yes i would start to get a little concerned but look we still have a long way to go before we even get down to that level in addition one other thing to kind of monitor here we can see right here there's this trend line look at this look at what the s p tagged low pivot low pivot and look at what we tagged on friday so this is a key point coming into monday if we open below it that's one thing i want to see if we close below this on monday or do we rally back up and close back on it on friday you can see we were right to the line and then by the end of the day it lifted up s p was down 1.1 on friday which again was a decent drop but it's not the massive drop overall that the nasdaq is seeing so just to give you my game plan for monday and i don't want to keep you guys too long here but my game plan is number one i don't buy it that we're going to have a stock market crash all right that's number one i don't buy it um too many retail folks thinking that with the fear etc um and again with the plunge protection team uh out there lurking if we were to start to see it in the near term and the fact that the midterms are coming up it's very unlikely we'll see it now again doesn't mean we won't have the futures down sharply tonight potentially we'll have to see where they open also we have to watch oil oil's obviously been a big player here in the overall market action okay so that's number one i don't i don't buy into this october crash not on a midterm year um going into the elections in literally two weeks right number two i actually think if we see coreweave gapping down if we see other names gapping sharply down like stx seagate technologies i will actually be buyers on the gap down i will start to buy and accumulate as they come into key levels for a retrace generally crashes happen at the end of bear markets or at the end of a rundown at this point we are only at the mid stages or early stages of the corrective move in the semi ai trade so it's very unlikely we'll get that crash uh on that so i'm a buyer on the gap down on monday should we get it i'll keep you guys posted on that quickly just looking again we can look at oil real quick here just to quickly go over that oil again had a big move up last week net net from about 89 to about 99 so big move up there's a gap fill approaching on crude oil here that i'll be watching very closely uh but i i actually have started nibbling on friday on a short on oil so i'm looking to short and i am short oil here all right natural gas we're not going to go over that if we look at quickly on gold here gold is barely holding on but it's still holding on to its key support so that's nice to see on gold but the question is can it hold this week and silver got a good bounce on thursday but it did break and confirm this did come into this key support can it hold 55 dollars this week these are all questions that i'll be following remember live my live game plan monday through friday at 9 a.m eastern time where i go over all of the action the trade setups that i'm looking for for that day and don't forget to join my gareth's top squad i'll be putting out a video for members in just a little while later today with that 50 off coupon code as well all right guys it's going to be a wild one pulled on to your horses again if you're with me in verified investing you see my live portfolio my pnl everything and my position size real time if you're on my gareth's top squad i thank you for that support as well and i'll get you guys a video later take care