Posted by Pete Stolcers on May 7
Posted 9:50 AM ET – Last week the market tested the 200-day moving average and support held. The SPY has been making a series of lower highs and a descending triangle pattern is formed. This is bearish from a technical perspective and a breach of horizontal support would be bearish. The 100-day moving average is providing resistance and the 200-day moving average is providing support. There are many dark clouds that need to part and the market could swing either way.
A possible trade war with China is the biggest threat. The delegation returned Friday and the White House has been very quiet regarding the negotiations. Chinese media has been optimistic, but the gap seems wide. All it will take is one tweet to sour the tone.
The EU tariffs have been postponed a few weeks and a NAFTA deal is within reach. These trade negotiations should run their course in June.
Trump will make a decision on the Iran nuclear deal in the next week and the market should be prepared for the US to pull out. I don’t see this as having a big market impact.
Earnings have been excellent with the average company growing profits by 25% and revenues by 10%.
Economic data points have been solid. I don’t put much credence in the BLS jobs report. I watch ADP and it showed that 204,000 new jobs were created in the private sector during the month of April. ISM manufacturing and ISM services were also good. Official PMI’s were released a week ago and they were good.
The Fed plans to hike rates two more times this year and that is dovish. They are comfortable with the current inflation rate and they have breathing room. Hourly wages only increased .2% was keeps inflation pressure low.
Swing traders should have bought the QQQ last Friday when it crossed above$163.50. As I mentioned in my comments the market could have gone either way. We had a nice entry point and let’s see if this bounce can gain some traction. Place a stop to sell the QQQ if it trades below $163.50 at any time. We don’t want to lose money on this trade and the tone can sour quickly. A close above $168 would be bullish.
Day traders need to go with the flow. Wait for the momentum to establish itself and trade and that direction. Use the first hour range as your guide. This has been an excellent day trading environment and earnings releases are providing lots of action. Option Stalker trades a specific pattern and we nailed four big trades Friday.
The backdrop is “noisy” and the market could swing either way. Political news is driving the action. Trade negotiations should end in the next few weeks and the outcome will determine the direction for the rest of the summer.
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