The trend continues, my friend. There’s a lot of concern about which way the election is going to go. And the war is still in the back of everyone’s mind.
We’re really just at a balance point…
This Explosive Pattern Only Works On Small-Cap Stocks
Table of Contents
The Big Picture
Now, I remain bullish. Particularly AI. But the fact is, over the last couple of weeks, the “de-risk trade” is still playing out.
And it’s fueling…
Market Uncertainty
At the end of the day, we’re stuck in this environment for another week. Maybe two.
All these big traders and hedge funds are de-risking. They’re selling their winning positions in a lot of AI-related stocks.
What does that selling do? It suppresses the price.
We all know that we’re in a heavily concentrated market. AI, semiconductors, and everything related to AI have pushed the stock market up over the last couple of years.
When those stocks start rolling over because they’re selling off, it creates a lot of sideways chop.
Look at the State Street SPDR S&P 500 ETF (NYSE: SPY) 6-month chart:
SPY 6-month, daily candle, sideways chop for 3 months
For the past three months, it’s basically unchanged.
Obviously, it’s gone up and down. It’s trading in a channel between ~$760 and ~$775. If you look at the average over the past two months, it’s basically unchanged.
We’re seeing that reflected in the trading environment. Which means we have to…
Adjust To Market Conditions
Now, we’ve had some good trades. We’ve even had a few bangers. But the overall market and market sentiment tell us what to do.
Right now, it’s telling us to:
- Size down
- Be more patient
- Look for much more realistic goals
Just a few weeks ago, we were looking for wayyy more upside in low-float stocks.
But we react to the environment. In other words, you trade what the market gives you.
Maintain Perspective Through the Chop
A lot of people are freaking out right now. One day the market is down, the next day it’s up. Just when it looks like it’s going to drop, we get a bounce day like yesterday.
That explains why the fear & greed index has been stuck in “Fear” for the past several weeks.
The Cboe Volatility Index (VIX) is within the “Normal” range. But recently it tapped the “Elevated” level.
Chicago Board Options Exchange Volatility Index, 6-months
Listen, the election is next week. The uncertainty won’t last more than a couple more weeks, okay?
If you’re just getting started, I’m sure your goal is to trade for many years to come.
Now, if you’ve been trading for 20-plus years like me, you know it’s time to zoom out a little bit. Recognize that a few shaky weeks don’t change everything.
Manage Risk and Know When To Step Back
It’s okay to be tighter with stops right now. Take smaller losses. Consider tighter targets and take smaller gains.
You can’t look for audacious huge price targets in this market environment. You’ll just end up giving back a lot of gains and, ultimately, turning winners into losers.
Know when to dial back. It can be a little frustrating, but you can always just wait it out. Cash is a position.
My Take
I think in a few weeks you’re going to get a newsletter from me where I’ll be talking about too many stocks. I’ll be telling you about multiple stocks hitting the algos every day.
So, stay safe, my friend. We’ve just got to ride out the interim until then.
Watchlist
On Monday (Oct. 26), Braiin Limited (NASDAQ: BRAI) announced an expansion of its AI-powered “contact center as a service” platform. It was a solid runner yesterday, respected VWAP, and traded on much higher-than-average volume.
BRAI 10/27/26, 5-min candles, Oracle levels
With BRAI, I like breaks above yesterday’s Oracle major resistance at $4.20, with risk at $4. The next Oracle resistance is in the $4.90s, which would be a 3.5-to-1 reward-to-risk. Remember, in this market, consider tighter targets.
On My Radar
- Watch live: FOMC press conference today at 2:30 p.m. ET
- The money flow: AI de-risking gave consumer staples their best month in 5 years
- Tech on deck: Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) report earnings after the bell today
- By tapping into this recurring market pattern over the past year, I’ve been able to spot explosive stock moves before they even happened