Market analysis for Oct. 20th, 2025

Remembering 1987 crash

On this day in 1987 the stock market had the WORST DAY in its history Both the S&P 500 and Dow Jones had the largest single day percentage losses in their history The S&P 500 was down by 20.5% and the Dow Jones was down by 22.6% IN JUST 1 DAY ... Let me repeat The S&P 500 and Dow Jones were both down by more than 20% in 1 day October 19th, 1987 is now known as Black Monday because of it. This was my baptism by fire into the markets. I was a full two weeks into my career as a stockbroker.  What I've learned is that you just never know when the next big one is coming. We continue to build short positions in our ATM portfolio. Remember, you want to buy insurance BEFORE your house is on fire. ​

We had a solid, easy day Friday. We didn't get as much buying power deployed as I'd like but our 8% ROI on the day was solid. Thank heavens for the better I.V. we've had lately. It's down a bit this morning but the VIX is still above 20, which still delivers solid premium. We had one of my favorite SPX 0DTE setups going Friday. Today may be a repeat of that. 

Here's a look at our day Friday:

Let's take a look at the markets: 
Technicals are back to bullish. 

The trend is no longer bearish. Its more of a consolidation zone that goes back to the first part of Sept. 

​The SPX volatility risk premium (VRP) has eased to 2.8%, marking a shift from the elevated levels seen earlier this month. With implied volatility still considered slightly overvalued relative to realized volatility, short-term sentiment appears cautious but not extreme.
The recent stabilization in VRP, alongside mixed price action following a sharp drop, suggests that traders may be reassessing risk exposure after the earlier volatility spike.
In the near term, the index’s ability to hold current levels could determine whether volatility continues to compress or re-expands into next week’s session.

SPX is looking at an expected 1.56% move for the week. Still pretty solid I.V. 

December S&P 500 E-Mini futures (ESZ25) are up +0.29%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +0.41% this morning as signs of easing trade tensions between the U.S. and China helped boost risk appetite.
U.S. President Donald Trump last week moved to ease concerns over a trade war with China. President Trump on Friday confirmed plans to meet with Chinese leader Xi Jinping at the end of the month in South Korea. When asked by Fox News on Sunday about his threat to impose an additional 100% tariff on Chinese goods, Trump said the levy was “not sustainable,” though “it could stand.” He added that he thinks “we’re going to be fine” with China. Notably, a new round of U.S.-China trade talks is scheduled to take place this week in Malaysia between Treasury Secretary Scott Bessent and Vice Premier He Lifeng.
This week, investors also look ahead to the release of key U.S. inflation data and a slew of corporate earnings reports.
In Friday’s trading session, Wall Street’s major equity averages ended in the green. Most members of the Magnificent Seven stocks advanced, with Tesla (TSLA) rising over +2% and Apple (AAPL) gaining nearly +2%. Also, Kenvue (KVUE) surged more than +8% and was the top percentage gainer on the S&P 500 after rejecting allegations from a lawsuit filed last Thursday in the U.K. High Court, stating that its baby powder “did not contain asbestos, and does not cause cancer.” In addition, American Express (AXP) climbed over +7% and was the top percentage gainer on the Dow after the credit card giant posted upbeat Q3 results and raised the lower end of its full-year guidance. On the bearish side, chip and AI infrastructure stocks slumped, with Oracle (ORCL) sliding more than -6% and Arm Holdings (ARM) falling over -3% to lead losers in the Nasdaq 100.
St. Louis Fed President Alberto Musalem said on Friday that he could back another rate cut to support a cooling labor market but stressed that policymakers should decide on a meeting-by-meeting basis amid economic uncertainty. Musalem added that he views the current stance of Fed policy as “somewhere between modestly restrictive and neutral.”
U.S. rate futures have priced in a 98.9% chance of a 25 basis point rate cut at the conclusion of the Fed’s October meeting.
Third-quarter corporate earnings season kicks into high gear this week, with investors awaiting fresh reports from major companies such as Tesla (TSLA), Netflix (NFLX), Coca-Cola (KO), Intel (INTC), International Business Machines (IBM), Texas Instruments (TXN), Lam Research (LRCX), AT&T (T), T-Mobile US (TMUS), Philip Morris (PM), and Procter & Gamble (PG). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.2% increase in quarterly earnings for Q3 compared to the previous year, marking the smallest rise in two years.
Meanwhile, the U.S. government shutdown continues, with no serious negotiations taking place. The shutdown means that official U.S. economic data continue to be delayed, giving Fed officials only a partial view of the economy. However, the Department of Labor has recalled a limited number of employees to release the September inflation report on a delayed basis this Friday, just four days before the October FOMC meeting. 
“We continue to expect the impact of the higher tariffs to keep building in the coming months, particularly in import-intensive sectors, but it will be interesting to see if the areas that have already seen spikes in prices, such as audio equipment and bananas, see further price pressures,” HSBC economists said in a note.
Market watchers will also keep a close eye this week on preliminary purchasing managers’ surveys on U.S. manufacturing and services sector activity, the National Association of Realtors’ existing home sales data, and the University of Michigan’s Consumer Sentiment Index.
U.S. central bankers are in a media blackout period before the October 28-29 policy meeting, so they are prohibited from making public comments this week.
Today, investors will focus on the Conference Board’s Leading Economic Index for the U.S., which is set to be released in a couple of hours. Economists expect the September figure to rise +0.1% m/m following a -0.5% m/m drop in August.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.018%, up +0.20%.

The U.S. now spends more on interest than national defense. Read some history...this is usually the first step towards empires falling. 

​Institution Vs Retail continues, while retail smashing calls, funds has been net puts buyers 8 out of last 9 weeks. Who's right?

My lean of bias today is more neutral. Futures are up as I type. We've been range bound for the last five trading days. Unless something snaps us out of this zone it should be more of the same. 

Todays training session: ​Jesse Livermore: How to Pyramid a $1,000 Position into $100,000

Let's take a look at the intraday /ES 0DTE levels: 6729* (200 period M.A. on 2hr. chart), 6740, 6750, 6761, 6771 are resistance levels. 6720, 6708, 6705, 6699, 6681 are support levels. 

I look forward to seeing you all in the live trading room shortly! Our /GC day trade is already off to a good start.