Market Grinding Higher – Go With the Flow – Use This Stop
Posted by Pete Stolcers on January 9
Posted 9:30 AM ET – If you are thirsting for commentary, you’ll have to review my comments from the last few days. The news is light and that favors the current upward momentum. Trade talks with China are progressing and buyers are nibbling ahead of earnings season.
Trade officials extended negotiations and extra day and traders view that as a positive development. If another round of trade talks is scheduled in the United States next week the market will continue its rally. This is possible.
China’s economy is slipping and efforts by the PBOC during the last year have not been bearing fruit. Fiscal stimulus and additional easing are expected.
Earnings season is approaching and bad news is priced in. At a forward P/E of 14.5, stocks are attractive. Year-over-year earnings growth rates will slow because the tax cuts were imposed a year ago. However, profits will still hit record levels.
Theresa May will try to appeal to the House of Commons, but her leverage is very limited. Brexit could go either way.
For the time being the market is giving the Fed the benefit of the doubt. Buyers are hoping that they adjust their tightening policy in light of global economic weakness.
Swing traders bought the SPY at $255 yesterday. This was a half position and we will raise the stop to $254 on an intraday basis. Our target is SPY $262. There are still many possible “landmines” and I don’t want to get aggressive on this bounce. It will take many months for a base to form and we can expect pullbacks.
Day traders need to focus on the long side. Stocks gapped higher on the open yesterday and these moves have been faded. The opening gap this morning will be vulnerable. After stripping away all of the gains yesterday, the market found support and it almost rallied back to the high of the day. Wait for support and buy. If the market is above the first hour high you can get more aggressive with your longs.
This bounce should last another week or two.
Market commentary provided by OneOption, LLC a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.