August 22, 2018
Posted 9:30 AM ET - Yesterday the S&P 500 made a new all-time high. The market lacked a catalyst. When the buying dried up profit-taking set in. Many analysts are blaming the Cohen/Manafort verdicts, but I believe the recent price action is all “noise”. The market lacked a driver to start with and traders have successfully faded opening gaps to a new high this year. Trade talks with Mexico, China and Europe are underway. A deal with Mexico is close and an agreement could fuel a breakout. Trade negotiations with China will be lengthy and I'm not expecting any progress. The FOMC minutes will be released today. I don't believe there will be any new information. Fed Chairman Powell will speak on Friday and we can expect hawkish comments. The market doesn't seem to care because economic growth is strong and inflation is moderate. A rate hike in September is expected. Earnings season has been excellent and buyers will scoop any dip. Charges against Manafort, Cohen and Papadopoulos reflect poorly on Trump's staffing decisions, but none of the charges are tied to Russian collusion. Trump supporters will not be swayed and they will view this as a smear campaign by the left. Swing traders are long a half position of SPY and we will buy more at $280. We will also place a buy stop at $287. If the market can breakout we will add the second half. I would prefer to buy a dip, but I don't want to miss a breakout. The market wants to move higher. Day traders should let the market come in this morning. Use the first hour range as your guide. Look for sectors that have relative strength and relative weakness. If we are above the first hour high, favor the long side. If we are below the first hour low, favor the short side. Trim your size and trade count. Set passive targets and take profits quickly. This is a low probability trading environment and it will continue through Labor Day. I will not be publishing market comments from August 27 - 31. . .
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