October 30, 2019
Posted 9:30 AM ET - Today the Fed is expected to cut rates by a quarter of a point. This news is already baked in. Stocks have not been able to advance after a steady round of earnings this week. Apple and Facebook will post results after the close today. Trading volume has been anemic and that will change today. The FOMC statement will be more hawkish than the market would like. Domestic economic conditions are stable and political concerns are subsiding (US/China trade negotiations and Brexit). This gives the Fed breathing room. Day traders should wait for the press conference before taking a position. This morning advanced Q3 GDP (first reading) came in at 1.9% and that was better than expected (1.6%). ADP showed that 125,000 new jobs are created in the private sector during the month of October. That was better than expected (100,000). Weakness in Europe is starting to spread to the US, but at a very gradual pace. China is dragging its feet on US agricultural purchases. The quantity and timeline seem to be in question. Regardless, a trade truce seems likely in the next month. England will hold a general election in December and Boris Johnson hopes that he can gain additional support and pass the Brexit deal that was approved two weeks ago. Earnings season has been good. Stocks are trading at the upper end of their valuation range and they have not been able to rally after the news. Amazon, Netflix and Google were down after reporting and the last of the mega cap tech stocks (Apple and Facebook) will report after the close today. Sellers are typically passive ahead of these announcements and we could see some profit-taking in the next few weeks. Swing traders should try to reduce risk ahead of the FOMC statement. Out of the money bullish put spreads that were sold during the last few weeks should be trading for pennies. Reel them in and get ready to reload. The market volume during this rally has been extremely light and the gains are vulnerable. Asset Managers are not worried that they will miss a year-end rally with stocks trading at the upper end of their valuation range. We need a market dip to get the action going and we will be ready to sell out of the money bullish put spreads on strong stocks when we get it. If the market rallies after the FOMC statement the volume will remain very light and stocks will gradually float higher. Intraday ranges will be extremely tight. If this scenario plays out we will passively participate. I will be posting my swing trading video tonight and I'm hoping for a negative reaction to the FOMC statement. Day traders should focus on post-earnings plays during the first two hours of trading. Look for stocks with heavy volume. They will have to do the heavy lifting on their own because the market will be flat. Wait for the press conference after the FOMC statement and follow the momentum. Support is at SPY $302.50, $300 and $295. Resistance is at the all-time high. Hope for a negative reaction to the FOMC statement and Apple/Facebook earnings. Our best trading opportunity would come on a pullback. . .
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