Market Needs To Test 100-Day MA Again – No Meaningful Rally Until That Happens

Posted 9:30 AM ET - The market is going through some nervous jitters after being trapped in a very tight range this summer. Friday the market plunged and the move was over-extended. Yesterday's bounce was also over-extended. This morning we are due for a soft open and the SPY will rest right on horizontal support ($215). September is typically a weak month. I believe we need to test the 100-day MA ($212) before we see a decent rally. We touched that level briefly before the market opened Monday and buyers immediately stepped in. The threat of a rate hike this year has investors on edge. Earnings were mediocre and economic growth is sluggish. Stocks are fully priced at this level and there is room for a pullback. Election polls are tied and Donald Trump is an "unknown". I personally believe his economic policies will stimulate growth, but the market hates uncertainty. Hillary is a known commodity and the impact of her policies is easy to predict. Stocks are still searching for direction. The news is light and the action is choppy. I like fading moves that are greater than 10 S&P points overnight. Once the early momentum stalls, we typically reversed direction. I believe that pattern will hold true today so I will look for stocks with relative strength early in the day and I will wait for support. If the SPY closes below $215 today I will buy a few puts to hold overnight. I am long BZQ since the Olympics and this is a fairly large position. Any hint of a rate hike will spark selling and emerging markets. I also believe that commodities will remain weak due to sluggish global growth and I believe that Brazil is on the brink of a credit crisis. This is a longer-term position. The majority of my trading is day trading. Now that the volume is back we have been able to find excellent opportunities in the chat room. Let the early wave of selling run its course and look for opportunities to play the bounce. Once that rally stalls, take profits and wait for the next move. A new low after two hours of trading would suggest that we will drift lower today. A bounce with a higher low would suggest that the market will move back into the range today. Use SPY $215 as your guide. . .

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