Sell the SPY This Morning – This Is Where We Bought Friday

Posted 9:30 AM ET - Yesterday the market was poised to rebound and support at SPY $294 held through mid-day. In the afternoon stocks retreated on news that China had items that were not up for negotiation. The tone has soured overnight. Trump has blacklisted a number of Chinese companies due to civil rights violations. Face-to-face trade negotiations will resume Thursday and it is doubtful that they will bear fruit. The S&P 500 will challenge critical support at the 100-day MA this morning. An easy breach would be bearish. A trade deal with Japan was formally signed and that is positive. The scope was fairly narrow, but at least we have one trade deal. Boris Johnson said that a hard exit for England is very likely. Negotiations with the EU hit a brick wall and this was confirmed by Angela Merkel. It's still unclear if England can leave the EU without a deal on October 31st because Parliament ruled it to be unlawful. Earnings season will begin next week. There have not been many warnings and good results are priced in. Samsung posted earnings that were better than feared. The Fed Chairman will speak today at 12:30 pm Eastern and the FOMC minutes will be released tomorrow. Traders will be looking for any hint of a rate cut on October 30th. Swing traders should sell the SPY on the open. We bought right at this level Friday and we are going to scratch the trade. Our bullish put spreads are still be in good shape because we sold them below technical support on stocks with relative strength. Make sure to buy those spreads back in if that support is breached. Day traders should use the 100-day moving average as a guide today. If we are above it, favor the long side. If we are below it, favor the short side. The overnight news was fairly negative and I expect to see some early selling. If we have two consecutive long red bars that close on the low (five-minute basis) favor the short side today. . . This is a news driven market with lots of cross currents.

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