Market One Step Closer To A Buy – Watch For These Patterns

Posted 9:30 AM ET - – The S&P 500 is down 70 points before the open and yesterday’s strong close gave Asset Managers an opportunity to reduce risk into the FOMC statement Wednesday. The price action Monday suggests that buyers are getting more aggressive and that we should find support well above SPY $420 today. We did not get the stacked long red candles with little to no overlap on the open yesterday. That “OMG” drop did not materialized so we did not get the capitulation low. Consequently, we did not get the snap back rally off of the low that I was looking for. That sets up a different scenario today and I describe it below. Swing traders if you did not adjust your risk yesterday, you are probably not going to adjust it today so I am not going to provide commentary on how to manage your bullish put spreads today. I do believe that we are one step closer to a temporary support level after seeing the bounce yesterday. The market should stabilize after the FOMC statement. That initial shock of a rate hike in March will subside and the focus will shift to earnings. I do like selling OTM bullish put spreads and I feel SPY support at $420 will hold. Day traders look for an early drop to $429. That is a support level I believe will hold. We would like to see that support as 1OP drops. If the initial bearish cycle is benign, we are going higher. The magnitude of the overnight drop is greater than I would have expected so we need to use caution on the open. Overseas markets were weak even after our bounce. I am looking for a higher low double bottom today. If we get this, support will form and buyers will start to get more aggressive. If the market has stacked green candles right after the open (unlikely) we will quickly form support and grind higher today (perhaps to the 200-day before the FOMC). Support is at $420 and 429. Resistance is at $440 and the 200-day MA . .

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