G20 Optics Will Be Market Friendly – I Will Buy A Dip To This Level
Posted by Pete Stolcers on November 21
Posted 9:30 AM ET – The market is weak and the S&P 500 was within striking distance of the October low yesterday. Overnight gaps higher have been faded the last two months and the gains this morning are likely to vaporize. There isn’t any incremental overnight news to justify the bounce. Retailers have been posting results this week and the reactions have been negative. The next bounce should be a decent one and I expect it next week.
Trump and Xi will meet (11/29) and is in the interest of both leaders to paint a rosy picture. Stock prices in both countries are suffering and investors are worried about a full-blown trade war. Even if both sides are miles apart they will try to calm nerves. This will be a long negotiation process and the mudslinging will continue next year. For now, I believe the market will bounce ahead of the meeting. Negative remarks would spark massive selling and neither leader wants that.
Next week Powell will speak (11/28) and the FOMC minutes will be released (11/29). Traders want to hear that the Fed is aware of slowing global growth and that they might pause. Without this softer tone the rate hike in December will keep a lid on any rally.
A week from Friday China will post its official PMI. Investors will be watching for any signs of a slowdown. Manufacturers are overstocked with inventory ahead of potential tariffs.
Italy said that it might tweak its budget in response to the EU. It faces stiff fines if it continues with its proposed deficit spending.
The new Mexico/Canada/US trade agreement will be signed next week, but it still has to get through Congress. Democrats might vote it down.
There are potential landmines everywhere and bearish sentiment is high. I believe the market is oversold and we are due for a short squeeze. The optics of the G20 meeting between Xi/Trump will be favorable. Fed speak should be a little more tame and the PMI’s should be fine for another month.
Swing traders should buy a half position of SPY at $263.50 and another half at $260.50. We missed our entry by $.15 yesterday. We will hold without a stop for the first day if we are filled. Friday is a half day and I will not be posting market comments. We will keep the same set of instructions working.
Day traders should look for a shorting opportunity on the open. If the bid starts to crumble right away, look for shorts. If the market is able to shoulder early selling and it starts to grind higher, favor the long side. Trading volume will subside ahead of the holiday and you should trim your size and trade count. Support is at SPY $263 and resistance is at $269.
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