Posted by Pete Stolcers on April 19

Posted 9:00 AM ET – Yesterday the market probed for support and it bounced before it challenged the lows from Friday. I view this higher low as a bullish sign and the bid is starting to firm up. Stocks should move higher and the market will challenge the 50-day moving average this week.

Political news has been dominating the headlines. Trump is doing well internationally and China is taking a hard line with North Korea. He wants to work on a healthcare bill before tackling tax reform and that is bearish.

Earnings season is cranking up and that is the current focus. Tech stocks are strong this morning and the overnight news was good. The market typically rallies into mega-cap tech stock announcements (GOOG, AMZN, AAPL, FB and MSFT). Buyers will remain engaged the rest of the month and the price action should have an upward bias.

Economic conditions are stable and I am disregarding the weak jobs report. I believe it will be revised upward in May.

Swing traders should sell out of the money bullish put spreads on strong stocks that have a positive earnings reaction. The short strike price should be below technical support. If that support level is breached, buy back the put spread. This strategy allows you to distance yourself from the action and it takes advantage of time decay.

Day traders should look for an opportunity to get long today. I don’t trust the early rally and I believe there will be a better entry point if you are patient. Wait for a dip and enter long positions. Keep why on the XLF. The financial sector is the key to any market rally. If banks can’t move higher the market rally will be limited. They are on major support levels and they have plenty of upside. The macro backdrop (higher interest rates, strong consumer confidence and improving employment) is bullish for banks.

Look for choppy price action with an upward bias through April.

Support is at SPY $232.50 and resistance is at $235.20.
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