We Need That Market Breakout Now Or Risk Falling Back Into the Range

Posted 9:00 AM ET - The clock is ticking and the market needs to breakout in the next couple of days or risk falling back into the range. Last week the market tested the breakout and it filled the gap from two weeks ago. Stocks bounced and they are within striking distance of the all-time high. This retest was typical and it validates the breakout from a few weeks ago. The price action has been lackluster the last two sessions. In fact, the only decent movement we’ve had was the initial reaction to the jobs report - it only lasted 2 hours. The economic news is light and earnings season is starting to wind down. The results in both areas have been good. The FOMC statement last week was relatively dovish. In a unanimous decision Fed officials left rates unchanged and improving labor conditions were cited. Economic risks are balanced and most analysts believe that the next rate hike will come in June. Trump has been in office a couple of weeks and the knee-jerk reaction to his rants is subsiding. Eventually the market will become numb to all of this. Stocks will test the downside this morning. Overseas markets where good and the opening dip should be brief. Support is at SPY $228.60. We can trade below that level during the day, but we must close above it. Swing traders should have call positions. If we close below SPY $228.60, exit your call positions and wait for the next entry point. If the market closes above $230, add to call positions. Day traders need to be a little patient this morning. We will test $228.60 right out of the gate. If that support fails, we need to wait before scaling into long positions. Next support is at $227.60 and I doubt we will get that low. If the market finds support at $228.60 and it starts to grind higher, trade from the long side right away. You can get more aggressive if the market takes out the first hour high and really ramp up if we make a new all-time high. The table is set for a nice breakout; I just hope this opportunity is not squandered. We need to see late day buying with follow through the next morning. If we see this we can get long with confidence. The next few days are critical. We will either breakout or fall back into the range. . .

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