February 21, 2018
Posted 9:30 AM ET - Yesterday the market drifted lower and I believe the selling will end today or early tomorrow morning. This retracement is typical after a 12% correction. Once the bid is confirmed we will see the next leg higher. Stay long. This afternoon the FOMC minutes will be released. This could be a small speed bump. The Fed knew the unemployment number before it released its statement, but it did not know the market’s reaction. If it did, the rhetoric would have been dovish and I suspect it was balanced. The new Fed Chairman (Powell) wants a smooth transition and the market has been nervous. In coming weeks dovish "Fed speak" will calm the market. Three rate hikes are expected this year and any comments that confirm that will be market friendly. Interest rates are still near historic lows and they have a long way to go before they impede economic growth. The Fed has been much more aggressive relative to other central banks and they don't need to play catch-up. Earnings growth is excellent and guidance is fantastic. Politicians "kicked the can" and the debt ceiling/budget is not weighing on the market. Swing traders should use the 100-day moving average as a stop on a closing basis. I want to give the market lots of room to move. Support is at SPY $269.60 and that level could be tested – filling the gap from last Wednesday. Any weakness after today will be brief and shallow. I'm expecting the next leg of this rally to start this week. Option IVs have come in and this is when call premiums will take off. Once the buying starts we could see FOMO (fear of missing out). Day traders need to look for opportunities to get long. Let the bid establish itself and buy stocks with relative strength. I suggest being flat into the FOMC minutes. Wait for the direction to be established and join it 15 minutes after the release. If the reaction is negative I expect the market to close on the low and to see an early dip tomorrow followed by a quick reversal. If the FOMC minutes spark buying the next leg of this rebound will start today. I expect the market to reach SPY $274 by the close Friday. . .
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