Bullish Speculators Getting Flushed Out – Watch These Support Levels

Posted 9:50 AM ET - The market is struggling to tread water. Earnings season is winding down and strong results were not strong enough to fuel a breakout. Economic conditions are solid, but they need to be with an upcoming rate hike. Investors doubt that Republicans will pass a watered-down tax bill before year-end. The first test will come Thursday when the House will vote on its bill. This would be the first of many hurdles. If they run into issues and it doesn't get passed before Thanksgiving the market will not like the news. Once it goes through the House it still needs Senate approval. The vote is much closer in the Senate and major concessions (SALT and postponing corporate tax cuts one year) will be made. The excitement over massive tax cuts is starting to wane now that the details are known. The news is fairly light this week and we are likely to see profit-taking. Bullish speculators are going to get flushed out. A nice drop to support at SPY $255 is likely. If that level fails we could test $250 (100-day MA). I'm not looking for a deep nasty decline, just a swift correction. The bid is still strong at lower levels. Any tax cut is better than nothing and seasonal strength will attract buyers at $250. Swing traders should be on the sidelines. Wait for the drop - start lining up your longs. Day traders will have a nice opportunity today. My indicators have been incredible and I will be trading futures in the chat room. I won't know until I see the action if we are going to bounce or continue lower. My gut tells me we will drift lower the first half of the day and there will be a small bounce this afternoon. A nice decline would serve us well. . .

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