August 21, 2018
Posted 9:30 AM ET - The market is treading water near the all-time high and we are in a news vacuum. Traders are taking time off so the volume is light. This compression will continue through Labor Day. A possible trade war with China, an Iranian blockade of the Strait of Hormuz and the threat of a government shutdown are keeping a lid on the market. Trump can control these events and he does not want a market correction ahead of mid-term elections. Analysts believe that a trade deal with Mexico will be signed in the next few weeks. Both sides are close and that will force Canada back to the table. A trade agreement with Europe is also being negotiated. Any improvement on this front will spark a market rally. Domestic economic growth is strong and inflation is moderate. As long as these conditions prevail, the market will absorb Fed tightening. Powell will speak Friday and the FOMC minutes will be released Wednesday afternoon. Quarterly profits were up 25% year-over-year and stocks are reasonably priced at a forward P/E of 16. Swing traders are long a half position of SPY and we will hold without a stop. Buy the other half at $280. Conditions will remain choppy for the next few weeks and we want to buy dips. Day traders should look for stocks with technical breakouts on heavy volume. You won't get any help from the market so the stock has to be strong. Set passive targets and reduce your trade count. NFLX, BABA and NVDA are bouncing and that is a good sign for the tech sector. . .
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