The S&P 500 is only 50 points from its all-time high and a strong jobs number this morning will keep buyers engaged. Earnings season has climaxed and 80% of the S&P 500 companies have reported. Politicians are still haggling over the stimulus plan and a $1.5 trillion deal is priced in. We are heading into a news vacuum that will last three weeks and the action will slow down.

This morning we learned that 1.76 million new jobs were added in July. That is within the range of consensus estimates (1.5 million to 2 million). Weekly initial jobless claims have been trending higher at a four-week average pace of over 1 million and I am tracking that employment data.

There was encouraging news out of China overnight. Exports increased 7.2% (-.2% expected) and that was largely due to medical supplies. Imports decreased by 1.4% (1% increase expected) and that could be a sign that future demand is soft.

Tensions between the US and China are escalating and President Trump is threatening to use his executive power to ban TikTok and other Chinese apps. The US forced China to close its consulate in Houston and they retaliated by forcing the US to close one of its consulate’s in China. The US also removed favorable trade status for Hong Kong when China tightened its grip on the region. A year ago this rhetoric would have had a market impact, but investors have grown numb to it.

Earnings season is winding down. On average revenues are down 11.5% and profits are down 33%. Investors expect a robust recovery in Q3 and I feel there is room for disappointment.

The economic news will subside dramatically the next three weeks and traders will desperately look for “drivers”.

Politicians will wait until the final minute to reach a stimulus agreement. Once they sign the bill they will flee DC for a three week recess.

This happens every year and the trading volume drops off substantially.

Longer-term swing traders who can’t watch the market intraday should be in cash. The goal was to gradually get there before mega cap tech earnings a week ago and we have missed some upside since then. I consider this a low probability trading environment and the market will do well to tread water the rest of the month. August is seasonally weak and we could see profit-taking. I believe that the next few weeks will give us clarity. We will be able to gauge the spread of the Coronavirus and we will be able to monitor initial jobless claims.

Traders who are able to watch the market intraday can trade the last leg of this rally. The all-time high on the S&P 500 will act as a magnet and a quiet news cycle favors the current momentum. Know that conditions can change very quickly. Bullish sentiment is extremely high and the recent price action feels like a buying climax. The S&P 500 is down 13 points before the open and gaps down have been good for day trading. Use Option Stalker searches to find heavy volume and relative strength. Wait for market support and by the stocks. During the next few weeks I will be watching for signs of market exhaustion. Late day selling with follow-through the next day would be the first warning sign.

Get ready for some quiet trading the next few weeks.