Wait For Support – Bid Will Grow and Prices Will Stabilize This Week

Posted 9:30 AM ET - Last week the market dropped on hawkish FOMC minutes and a soft ADP report. Some of those losses were erased Friday after the government's jobs report (222K). The market feels nervous and I believe we still have some work to do on the downside. As the week unfolds prices should stabilize. Earnings season will start this Friday when major banks (JPM, WFC and C) report. That will keep buyers engaged and tech stocks should bounce ahead of mega-cap earnings. Politicians have been in recess and investors are impatient. The next recess is in a few weeks and it's unlikely that any progress on health care reform will take place. That means tax reform will also be pushed back. The news is fairly light this week. Major support lies at SPY $240 and QQQ $135.30. Those levels will hold. Resistance is at SPY $242 and QQQ $138. Both will keep an early lid on the action today. Swing traders should look for opportunities this week to sell out of the money bullish put spreads. The next wave of selling will be your guide. If the market bounces before the lows from last Thursday are tested, start scaling into a few positions. If the market drops and the low from Thursday is breached, wait for major support at $240/$138. I don't plan on being very aggressive with my swing trades. I prefer to sell them after a strong earnings reaction. Day traders should use the first hour range as a guide. If the market is above the first hour high, trade from the long side. If it is below the first hour low, favor the short side. I don't have a good read on the market today. It could go either way and we are likely to see two-sided chop. Ideally the market will drop the next few days. I want to see bona fide support and this will help me identify it. . .

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