Market Support Failed and We Are Back In Cash – Buy If This Happens

April 20, 2018
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - esterday the market pulled back and the SPY closed below the 100-day moving average. I did not sense panic selling as we have seen in recent weeks. Earnings season is keeping buyers engaged, but we should've seen better strength. The market needs to rally back above the 100-Day MA before I re-enter bullish positions. Earnings announcements will be brisk next week. Results have been excellent, but expectations are high. Smart phone suppliers were reporting soft demand and chipmakers retreated yesterday. Apple is down this morning and it will weigh on the market. Economic releases have been strong. The political news has been light this week and that has helped the market. The airstrikes in Syria where successful, Mike Pompeo met with Kim Jong-un, China's last tariff statement was conciliatory and the Russian collusion investigation seems to be winding down. This is all good for the market. The FOMC meeting will take place a week from Wednesday. Interest rate worries are fairly subdued since they only plan to hike two more times this year. Fed speak was benign this week. Swing traders should have exited the XLF and XLE positions when the SPY closed below its 100-day moving average yesterday. The XLF position was a scratch, but XLE performed nicely. If the SPY trades above $270, buy SPY calls. Use the 100-day moving average as a stop on a closing basis. The background noise is subsiding and I want to get long if the market can get back above this technical level. Day traders should use the first hour range as a guide. If we are above the first hour high get long and know that there is resistance at SPY $270. If we rally above it you can get more aggressive. I would be a little more cautious on the short side. I don't sense panic selling and I believe buyers want to get long ahead of major earnings announcements next week. . . image

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