Market Compressing – Action Will Pick Up Monday
Posted 9:30 AM ET - The market has no pace or direction and traders are waiting for the next round of news. Official PMI's will be posted Monday morning and the economic releases will be heavy next week. Until then, expect choppy trading conditions and compressed ranges.
Theresa May has relinquished Brexit power to the parliament. The process could get sloppy and politicians are fragmented. England will ask the EU for an extension, but Europe is likely to demand a referendum (new vote).
US/China trade negotiations are ongoing and officials will travel to China Thursday. There is nothing new on this front and a summit is possible in June.
Economic releases are minor overnight and they were weak (Singapore's industrial production, Hong Kong's exports).
The Fed is dovish and the yield curve has inverted. This is typically bearish and it signals an economic downturn.
Swing traders are short a half position of SPY. We will short the other half if the SPY trades below $275. Use $284 as a stop on a closing basis. We are in a news vacuum and the action will be light. I believe that economic data points will deteriorate in coming weeks.
Day traders should reduce size and trade count. We are likely to stay in the first hour range - fade the extremes. If we breakout of the first hour range, favor that side.
The market will consolidate between SPY $277 and $284. We are right in the middle of that range.
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