Market Is Nervous Due To FOMC Next Week and Trump’s 1st Week

Posted 9:00 AM ET - Trading volumes are anemic and the market is stuck in a tight trading range. Earnings season is typically bullish, but investors are nervous about Trump's first weeks in office and the upcoming FOMC meeting in 10 days. The S&P 500 has traded in a 10 point range during the last two weeks on light volume and this is a low probability environment for day traders and swing traders. We did see a little more volume last Friday, but that was related to option expiration. January is typically a good month for the market. Volumes are brisk and the bias is bullish. That has not been the case this year. Earnings should be good and guidance should be optimistic given the promise of lower corporate taxes and reduced business regulations. Earnings season will kick into high gear on Wednesday – let’s see if that attracts buyers. Now that Trump is an office, there will be daily "noise" that we have to deal with. I want breakouts and breakdowns, not wiggles and jiggles. It's just a matter of time until one side (buyers or sellers) prevails. As long as we're in this range, keep your trading activity to a minimum. The S&P 500 is down five points today and oil is weak. We could see a nice dip on the open and I will not start buying until I see support. That could take it while to reveal itself. If we take out the first hour low and we keep drifting lower, favor the downside. Until the SPY closes below $225 or above $228 I'm going to keep my trading to a minimum. My bias has been bullish and I expected to see constructive price action already. The selling pressure will build as we get closer to the FOMC meeting next Wednesday. Our chances for a new all-time high in January are dwindling. Swing traders need to watch key support at SPY $225. If you've been following my advice, your call positions are very small. Stop your trades out if the SPY closes below $225. If we see a nice rally this week, exit your call positions and wait for the FOMC statement. Day traders trim your size and activity. Stocks that look great 1 minute quickly fade the next. There is no follow-through and it’s critical to set passive targets and to take profits quickly. Wait for the market to break out of this tight trading range. When it does trading volumes will improve very quickly and we will be back in business. Until then, keep your powder dry. . .

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