Market Is Trapped – Swing Traders Until We Breach This Level

Posted 9:30 AM ET - The market is trapped in a range between SPY $270.70 and $274. It will compress during the trade negotiations and we need to wait for a breakout in either direction. Until then, expect lots of "noise" within the range. The price action this week has been random. Large gains one-day are reversed the next day. I don't trust the opening rally this morning. The leading party in Italy has formed a coalition and that has eased credit concerns. Economic releases have been positive. The Unemployment Report showed that 223,000 jobs were added and wages increased .3% (moderate). Steel and aluminum tariffs will be imposed on Europe and Canada. Trump seems steadfast on this and it was confirmed by the Treasury Secretary last week. Negotiations with China are ongoing and this latest action demonstrates that Trump is serious. The summit with North Korea seems like it will happen. The FOMC will meet in 10 days and analysts are expecting a rate hike. They plan to accelerate tightening in 2019 and that could spook investors. Swing traders should be in cash. We were flushed out of our short position on Wednesday and we took small loss. We need to be patient and we need to wait for a catalyst in either direction. Day traders should watch for an early reversal. I don't trust the gap higher and we could see some selling. If prices hold firm for the first hour the danger will pass and the market will grind higher. Use the first hour range as your guide and go with the flow. Once the momentum is established the market tends to continue in that direction the rest of the day. Keep your overnight positions to a minimum. Support is at SPY $270.70 and resistance is at $274.

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