When the year ends with a whimper it is a bad omen.
PRE-OPEN MARKET COMMENTS TUESDAY – I hope all of you enjoyed the holiday with your friends and family. Traders will continue to party into New Year’s and the volume will remain light this week. There is not much in the way of news and there is a slight upward seasonal bias. I believe the SPY will float up to the 100-day MA.
If you are an aggressive longer-term seller, you are always looking for opportunities to enter well. You understand that year-end seasonal strength is a formidable force so you respect it. When that bounce does not unfold, you get a little more aggressive with your shorts because you want to take advantage of the bid while it is still there. Other bears do the same and that keeps a lid on the rally. When the New Year begins, sellers don’t have to worry about seasonality and they get more aggressive.
The wimpy bounce into year-end had mixed overlapping candles and light volume. Major upside resistance levels were tested and confirmed. We did not spend much time above them. The price action the last two months tells me that 2023 will start with some selling.
MasterCard reported that revenues increased 7.6% from November 1 to December 24th (flat for the period ex-inflation). I believe the market will like the number because consumers are not shutting down completely.
Longer-term swing traders need to stay sidelined. Our time will come in 2023 and we will be active once the market finds support. Until then, conditions will remain volatile with big swings both ways while we probe for that level. In Q1, Asset Managers are going to evaluate the economic impact caused by higher interest rates.
Day traders need to find a few good stocks each day. The market will not help or hinder. Stocks with D1 technical breakouts and heavy volume are always important, but now more than ever. Keep it small.
Support is at SPY $378 and resistance is at the 50-day MA.