April 26, 2018
Posted 9:30 AM ET - Yesterday the S&P 500 touched the 200-day moving average and it immediately bounced off of that support level. The volume during the drop earlier in the week was light and that was a sign that the selling pressure has eased. Earnings season is in high gear and the results have been good. The market is up before the open, but we have to be careful since these gaps higher have been faded. Facebook posted excellent results and mega cap tech stocks have a bid. Apple and Google were strong during the early market drop yesterday and that is a bullish sign. FANGs need to lead the charge in the next few days if the market is going to bounce. As I have mentioned in my recent comments the political news has temporarily subsided. Economic data has been strong on a global basis. US 10-year treasury yields inched above 3% yesterday. Eventually the market will get used to higher interest rates. Strong economic growth and moderate inflation will calm investors. The FOMC meets next Wednesday and if they stay true to their plan (two more rate hikes this year) that would be market friendly. By historical standards, a 3% yield is low. Interest rates can move much higher before they impede economic growth. Swing traders need to remain on the sidelines. The volatility is extreme and we are in the middle of earnings season. We need to see if big profits are enough to justify current valuations. We also need dovish comments from the FOMC next week. From a technical standpoint the market could swing either way. Day traders are in the sweet spot. Once the early momentum has been established it continues the rest of the day. Use the first hour range as your guide. If the market is below the first hour low, favor the short side. If the market is above the first hour high, favor the long side. In my Option Stalker Chat room we have been nailing post earnings plays. We look for a very specific pattern and the stocks must have liquid options. These day trades have been very profitable. Early gaps higher have been faded. Watch for selling pressure in the first hour. If the market can gain its footing it will grind higher ahead of AMZN earnings after the close. Energy stocks should also perform well today. . .
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