March 29, 2019
Posted 9:30 AM ET - There wasn't much overnight news and the market is treading water while we get through this news vacuum. Traders are waiting for major economic releases next week and they will be watching for signs of growth stabilization. Overseas markets rallied on news that US/China trade negotiations are progressing. We are also seeing some end-of-the-month/beginning-of-the-month fund buying as the quarter ends. China has aggressively been propping up its economic growth. The PBOC has reduced bank reserve requirements five times in the last year, the value added tax (VAT) has been lowered and fiscal spending has begun. Growth projections have been lowered to 6% this year and officials have been making cautionary statements. The official PMI on Monday will be very important. China’s market was up 3% overnight. ISM manufacturing, ISM services, ADP and the Unemployment Report will be released next week. Traders will watch closely to see if global economic deceleration is taking a toll on domestic activity. Investors want proof that February’s dismal job growth (20,000) was a fluke. I believe the government shutdown and bad weather contributed to slow employment growth. I follow ADP and private sector job growth was a healthy 183,000. Brexit is in limbo. I don't think Parliament knows where it stands. There are constant votes and pleas for extensions. The EU holds the cards and they will dictate the terms. Indecision on England’s part will come at a cost. Europe feels that member economies are slipping because of this uncertainty and the mood is somber. The deadline is quickly approaching. Earnings season is right around the corner and stocks are trading at the upper end of their valuation range (forward P/E of 16.5). Good news is priced in. The yield curve has inverted and that is typically a bearish sign. Swing traders should exit the short position if the SPY closes above $281. This is a half position and we will move to the sidelines if the market is able to get through major horizontal resistance. The economic data next week will drive it one way or the other. Day traders should wait for the bid to be tested. Opening gaps higher usually fade and a dip this morning will present a better entry point. Favor the long side and use SPY $281 as your guide. If the market is able to rally above the first hour high, get more aggressive with your long positions. I'm expecting a fairly quiet day and fund buying should provide a solid backdrop. The activity will return to normal next week and economic releases will drive the action. . .
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