Stay Short and Use This As Your Stop On An Intraday Basis

Posted 9:30 AM ET - The market is struggling to hold a bid during a seasonally bullish time of year. Every rally is faded and this is a longer-term warning sign. The overnight economic data was soft. We are likely to see a series of small bounces within a downward trend. Opening rallies have been faded so I don’t trust the 15 point gain this morning. There are a few bullish news items. Trump is going to temporarily postpone European car tariffs. Fed Chairman Powell will speak this morning and his tone could be a little more dovish. CPI came in at a benign .3%. A Brexit deal seems close, but it still has to get through England's Parliament. The negative news overnight has more weight. China's retail sales came in light (industrial production was in line). GDP in Germany and Japan missed expectations. Italy did not change its budget and it will exceed EU guidelines. VP Pence said that the G20 meeting in two weeks could be China's last chance to avoid a "Cold War". He said that US economic growth is strong enough to withstand a trade war and that he is convinced China fully understands the White House's message and position. The tone is very serious. In my comments during the last two weeks I have outlined the landmines and I'm not going to rehash them all. Global economic growth is slowing and my greatest concern is a credit crisis. We aren't there yet, but it could escalate very quickly. From a technical standpoint, the market tanked in October and the first bounce was not able to penetrate the 100-day moving average. Monday the S&P 500 easily dropped below the 200-day moving average and this is a particularly bearish development in the strongest trading month of the year. Swing traders are short the SPY (half position) and we will use an intraday stop of $276. We can expect bounces along the way. Dovish statements from the Fed, a possible Brexit deal, good domestic economic numbers and encouraging trade deal remarks (lip service) could spark buying. Ultimately, these bounces will be an opportunity for Asset Managers to reduce risk and they will unload more stock. We will stay short until the G20 meeting (if we do not hit our stop). Trump will likely hype the trade talks and that is our most likely chance to revisit the 100-day MA this year. Day traders should look for an opportunity to short the opening rally. Intraday volatility was extreme yesterday and we saw big moves in both directions. I traded smaller size and I kept my stops tighter when I was long. I felt that the rug could get pulled out at any time. Given my bearish bias, my stops were wider when I was short and I had greater conviction trading on that side. The same will be true today. The overnight news had a bearish bias. The market is oversold and I believe traders are preparing for dovish comments from Powell. That's why we are seeing an early bid. Bearish markets open higher and close lower. That has been the pattern the last three days and it will not change until we see strength in the last hour of trading. . .

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