Posted by Pete Stolcers on March 13
Posted 9:00 AM ET – Last week the market drifted lower and the breakout at SPY $237 was tested. Stocks bounced off of that support level after a strong jobs report Friday and we should see the next leg of this rally after the FOMC meeting Wednesday.
The probability of a rate hike is now at 100%. Traders will be scouring the FOMC statement for the tightening timetable. The Fed has been anxious to get interest rates back to a normal level and Trump’s fiscal spending plans will provide a safety net.
Although they would deny it, the Fed does assess the market impact of its policy. As long as stocks are moving higher, they will continue to raise interest rates.
Global and domestic economic conditions are improving.
Corporate profits will benefit from lower taxes and reduced business regulations.
Trump is still in his honeymoon and the market is willing to give him a pass for a few more months.
If investors were worried about a rate hike, the market would have tanked after last week’s robust ADP report (298,000). When the market rallied on the news it was a sign that tightening is already priced in.
Oil prices plunged last week and that put pressure on the market. As I mentioned in last week’s comments, lower oil prices have consequences and benefits. As soon as energy stocks find support, the market will grind higher. I’m expecting that to happen this week.
Swing traders should use SPY $237 as a guide. As long as we are above it, hold some overnight longs. If the SPY closes above $238, add to your long positions.
Day traders should use the same levels intraday. If the market trades above the first hour high I will get a little more aggressive with my longs. If the market trades above $238 and we get a nice grind higher I will get a little more aggressive.
This is a quadruple witch so you can expect some volatility. There should be one really good move this week and I’m expecting it to be on the upside.
Energy prices will stabilize. The FOMC does not want to “spook” investors after a second rate hike in three months. Consequently, the statement will be relatively benign and the market will like it.
Look for the next leg of this rally to begin this week.
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