The S&P 500 and the NASDAQ 100 tested the 50-day moving average and the 100-day moving average respectively on Thursday. These major support levels have attracted buyers in the last few months. Both indices bounced and they spent the majority of the day grinding higher. We can expect an early dip this morning to test the bid. Buyers will be watching for immediate support and continued strength after yesterday’s rally. A close on the high of the day would set a positive tone over the weekend and I believe prices will be firm today.

Overseas markets are up and Chinese stocks have a bid. I will be watching the FXI to see if it can rally above its 200-day moving average.

Yesterday’s 7-Year US Treasury bond auction did not go well and TLT is trading lower this morning. Part of the recent bounce in TLT might be attributed to a flight to safety as the S&P 500 was drifting lower. A Fed official (Evans) said that interest rates will not be raised until 2024. The Fed has been steadfast in its rhetoric and it is expecting inflation.

The economic news next week will help us gauge activity as states reopen. ISM manufacturing, ISM services, ADP and the Unemployment Report will be released. Yesterday’s initial jobless claims number was the lowest that we’ve seen in many months and this could bode well for next week’s numbers. Strong economic growth without the fear of a Fed rate hike puts us in the “sweet spot”.

President Biden held his first press conference this year and “all roads” pointed to his primary message. Democrats are going to pass a massive infrastructure bill with or without Republicans. After spending $9 trillion to recover from the Coronavirus, a $3 trillion spending bill will be a hard sell. The fear is that government spending will be squandered (this is always the concern). Tax hikes were not part of the primary message and it would be wise to keep that rhetoric to a minimum until our economic recovery is well underway.

We are only a few weeks away from earnings season and that typically attracts buyers. Guidance was strong when companies released Q4 results and the numbers could be excellent. The market needs time to grow into its current valuation and we almost have another quarter of profits under our belt.

Swing traders should remain long SPY. We are going to use a fairly wide stop and the 100-day moving average is our stop. The recent leg of this rally has been marked by a three steps forward, two steps backwards pattern and we do not want to be shaken out when the economy is on the brink of expansion. Manage risk on your out of the money bullish put spreads. As long as the SPY closes above the 50-day MA today and as long as your stocks are above technical support, stick with the positions. Over the weekend we will have more time premium decay and the positions will be easier to manage. Next week is a holiday shortened trading week and that will also benefit bullish put spreads. Yesterday was a critical day and support held. We want to see a nice grind higher and a close near the high the day today. That would set a positive tone for Monday.

Day traders should look for an opportunity to get long this morning once the bid is tested. I don’t believe it will take long for support to be established. Tech stocks could be a little “soft” because of the drop in TLT. Focus more on cyclical stocks. As long as you are running Option Stalker searches for relative strength you will be able to find the stocks that want to run. After yesterday’s press conference, I believe that anything tied to infrastructure bill will perform well today. I also suggest including heavy volume as a variable in your searches. There is a downward sloping trend line for SPY on a daily basis and if we trade above it today the market should be able to make a nice run.

Support is at the 50-day moving average and resistance is at $393.