To The Moon

$.SPX(.SPX)$ 🔥📉📊 $SPX 2007 Déjà Vu Meets the TACO Trade 📊📉🔥

13Oct25 NZT 🇳🇿

📌 Daily Structure

I’m watching how $SPX is behaving in the wake of the sharp 2.71% plunge on 10Oct25. The index closed at 6,552.51 that day after a failed attempt to hold 6,740, and that reversal has set the tone for the week. Price action since then has been testing whether this was a one-day flush or the start of a broader Q4 volatility expansion. Volume on the 10th cleared 3B shares, and the Cboe Volatility Index spiked 31.83% to 21.66, marking a clear shift after months of low-vol melt-up.

Multiple 9-count exhaustion signals fired intraday during the selloff as sellers stepped in aggressively. I’m treating this as more than a routine dip; this is the kind of tape that often precedes either a reflex bounce or the opening act of something structurally larger.

📌 Weekly Structure

I’m tracking the weekly candle closely. It shows a clean rejection from the all-time high at 6,764.58. Price sliced below the 5-day moving average (6,632.13) and is testing the 10-day (6,540.86). RSI(12) softened from 64.02 to 61.82. MACD remains positive but has started flattening, which often signals stalling momentum at stretched levels. The 20-day moving average (6,345.05) stands out as the next key support if 6,540 gives way. I see this zone as a structural hinge that could define the character of the next leg.

📌 Historical Echo

Here’s the eerie part. On 11Oct07, $SPX topped at 1,554.41 on roughly 3B shares. The following day was green, luring traders back in before the topping process played out. Fast forward almost 5,000 points to 10Oct25, and we’ve got almost the same volume, almost the same date, and the same type of reversal candle. I’m struck by how precisely this mirrors the 2007 rhythm, down to the relief day pattern that often follows.

👉❓Is this one of those October rhyme moments where a sharp flush is followed by a deceptive relief rally, or the start of a more sustained correction that clears the excess built during the AI-driven melt-up?

📌 Valuation Snapshot

The forward 12-month P/E ratio for $SPX is 22.8, which is above the 5-year average of 19.9 and above the 10-year average of 18.6. In similar historical cases, the S&P 500 was higher 100% of the time six months later with an average gain of 10.01%. This valuation stretch adds another layer to the current setup, sitting at the intersection of technical exhaustion and elevated fundamental expectations.

📌 The TACO Trade Factor

I’m also watching the TACO reflex carefully. Wall Street’s “Trump Always Chickens Out” trade has conditioned investors to buy tariff-induced weakness on the assumption that threats will ultimately soften. If that reflex kicks in, we could see a fast relief bounce that looks like 2007’s follow-through. But if the market senses the TACO trade is already priced in, that bounce could decay quickly, leaving structural levels to do the heavy lifting. This is where price action around 6,540 will tell the story.

📌 Key Levels to Watch

6,540 is the first battleground. A hold here could fuel a reflex bounce, but if it breaks, 6,345 (20MA) is the magnet. A failure there would signal a deeper liquidity flush. I’m watching how systematic flows react into these levels; whether they step in on weakness or accelerate the unwind will shape Q4 volatility. The weekly structure is stretched, and volatility expansion is clearly in motion.

📌 Pattern and Catalyst Outlook

I’m not expecting a V-shaped recovery on $SPY here. I’d like to see a relief bounce that then sets up a W or harmonic structure. The first level bulls need to hold is 652.50–653. The next is 656. And 660 is the critical level to reclaim. I really think October needs to digest some of this volatility while we see how $VIX behaves.

Maybe we do get a V recovery, but we’ll know more if this was wave 1. It’s only been a weekend since the initial flush. Banks are closed Monday, so Tuesday will be when all the liquidity break is truly settled. I can’t dismiss the possibility of a wave 2 down if relief bounces fail.

Several catalysts are lined up that could steer the tape:

1. U.S.–China trade drama or fresh “TACOing”

2. Q3 earnings season kicks off with the banks ($JPM $BAC $C $WFC $GS $MS)

3. $TSM and $ASML earnings check in on semiconductor health

4. Fed Chair Powell speaks Tuesday at 12:20 PM EST

5. Government funding negotiations remain unresolved

And then there’s big tech later this month. There’s plenty to position around, with volatility setting the stage for tactical trades rather than passive drift.

When price, positioning, and politics collide at scale, the smartest money shifts from prediction to probabilistic navigation.

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Trade like a boss! Happy trading ahead, Cheers, BC 📈🚀🍀🍀🍀

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