To The Moon

Some people may have noticed that the index spikes hard for two days every month, usually at the start of the month. Then the trend slides down like a paper airplane losing speed. Then a new month starts, and it spikes again.

This makes the daily chart look like a dog chewed on it, but the monthly chart keeps climbing steadily along the 5-month moving average.

This pattern started after July 4th this year. That's also when Trump's baby account policy was announced — a plan to get kids to auto-invest in the S&P 500.

From some big bearish orders, you can see the S&P 500 really wanted a proper pullback after July. July was painful for a lot of people, but the S&P 500 held firmly above its 5-month moving average. In other words, sectors can take turns falling, but the S&P 500's monthly average can't have a big drop. The market makers are really working hard.

Of course, retail traders have it even harder. For example, semiconductors had a big pullback in early October, but the S&P 500 didn't drop at all. And the sectors holding it up were clear: financials and retail, which had already taken the big drop earlier, plus software, which rode the September trend for free.

So if this pattern keeps going, the market will probably keep chopping around near highs, like the past two months, then squeeze shorts for two days in early November and push up to 7900. As for which sector gets crushed, builds up shorts, and then gets squeezed — that's really hard to guess.

Where Did the Money Go?

Speaking of which, something huge happened in early October: Trump accounts hit 70 million! A month ago it was under 10 million. How did it suddenly multiply?

Because on October 1, the U.S. Treasury announced it would automatically sign up 60 million American kids under 18 for Trump accounts. Then on the 2nd, the IRS commissioner said as many as 25 million Trump accounts could be funded by mid-October.

How much money? Eligible kids get a one-time $1,000 from the federal government, or a $250 contribution from the Dell family.

You can do the math — that's a lot of money. The IRS and Treasury definitely can't cover it, so they have to rely on big donors.

On that, the IRS commissioner said several major donations are in the works. "They range from small to large," he said. "We do have some donors giving nine figures. You know, there are a lot of donors like that."

You can guess which assets these big donors sold to get the money.

$Intel(INTC)$

But this whole sector rotation thing is just a guess for now. We need to wait until semiconductors actually bottom out to see any sign of a short squeeze. It's too early to say.

For trading, just watch whether TSMC's stock goes up or down after Thursday's earnings. Even though 100 is support for Intel, this pullback will probably target 90. But up or down, based on the cycle pattern from the top of this article, a real bounce in mid-month is unlikely.

You can still sell puts now, though. For example, sell a 90 put expiring in one month: $INTC 20261120 90.0 PUT$ . Skip this uncertain month, and you get about 30% annualized.

$Micron Technology(MU)$

Open interest data shows the near-month pullback target is 900, and next month's target is 800. Bottom line: a real bounce in October is unlikely. Consider a covered call strategy — sell calls.

$Financial Select Sector SPDR Fund(XLF)$

Bank stocks have been all over the place after earnings: first down, then up, then gap up and fade. The ETF looks good for selling puts, but individual bank stocks are showing signs of breaking down. Need to watch a bit more.