TLT is breaking major support and rates are moving higher. “Fed speak” tonight.
PRE-OPEN MARKET COMMENTS THURSDAY – The market has been in a steady drift lower and this morning it is testing the 200-day MA. The major moving averages have been converging so the 100-day MA is in play today. The volume during the decline has been better than average, but we are not seeing any long red candles. Instead, the bodies are tiny and the intraday ranges are compressing. The 20-day ATR was $9 in November and now it is $6. VIX/VXX are relatively low because of the market price action and we have not seen a spike.
These major moving averages are a magnet and they will be tested. When the selling pressure is heavy, they are breached by long red candles that close well below them. This is the price action we saw last year. When major support lines are poked, they are more likely to hold.
Beginning of the month buying should have provided some support yesterday. This was a chance for the market to bounce if even for a day. That did not happen and it is a sign that sellers are in control.
We have “Fed speak” tonight (Kaskari) and Powell will testify before Congress Tuesday and Wednesday. They have been as hawkish as possible and $TLT has broken an uptrend line two weeks ago along with the 100-day MA. This morning it is breaching another up trendline from October 21. The ECB is expected to hike 50 basis points on March 16th. The FOMC statement is on March 22nd.
Until inflation eases or the Fed rhetoric changes, buyers will be relatively passive. They will buy dips, but they will not chase. Asset Managers who feel that Fed tightening is closer to the end and who feel that a soft landing is likely will nibble. That is why the market is gradually pulling back. The move is lower and it is steady. No market bounces in the last two weeks signals that sellers are in control.
Swing traders are long SPY at $409 from two weeks ago. If the SPY blows through the 100-day MA, we will take our lumps and wait for a better entry point. If the SPY closes below $390 (evaluate in the last 5 minutes of trading), exit the position. I do like selling OTM verticals and I have been favoring bullish put spreads. I also like selling naked puts on stocks I like to buy. I feel that the market is going through a bottoming process and that we will see drops and bounces.
Day traders should favor the short side today, but wait for the action to unfold. These ranges have been tight and the action has been very choppy. Failed bounces are your best entry points. TLT is below support and it is taking heat this morning. QQQ is opening below the 200-day MA and those are bearish influences.
Support is at the 200-day and 100-day MAs and resistance is at the 50-day MA.