“Trump Speak” Makes Investors Nervous – Buy Dips – Support SPY $225

Posted 8:30 AM ET - Yesterday we saw some market volatility. Stocks started the day with a nice rally and that fell apart during Trump's press conference. His style is unconventional and investors get spooked by his comments. These knee-jerk reactions to his press conferences will subside over time. The market retreated to support at SPY $225.50 and then rallied into the close. The S&P 500 is down a little this morning and yesterday's gains will be given back. I'm not going to read too much into this price action. The market is caught in a trading range and it is searching for the next driver. I believe earnings season will be the catalyst that gets us through the all-time high. Banks post early in the cycle and even if the results are soft, I believe the sector will tread water. The Fed plans to hike three times this year and that is bullish for the financial sector. Guidance will be the key to the rally and I expect to see upbeat comments. Lower corporate taxes, reduced regulation and a possible holiday for repatriation will spark optimism. I would avoid healthcare stocks at this time. They are very vulnerable and the news is fluid. Obamacare will be repealed and we don't know the details about the replacement. Trump also feels the government should be negotiating drug prices with pharmaceutical companies and that will impact their profits. Gold is starting to inch higher and it looks attractive. Uncertainty is good for precious metals and we are seeing some signs of inflation in China. The dollar has also been a bit weak due to possible trade wars. Gold is the anti-dollar. Swing traders can hold a few call positions overnight, but keep your size small. Until we breakout to a new all-time high you have to keep your powder dry. Day traders need to wait for support this morning. SPY $225.50 is the first level and there is bigger support at $225. If these levels fail (unlikely) you need to focus on the short side. Swing traders should also exit long positions if this happens. Down opens have been very good for day trading. It's easy for us to spot relative strength when the market is down and as soon as the market finds support these stocks take off. I still prefer to trade from the long side. Don't read too much into this choppy price action. The market is searching for direction and it is trapped in a range. When the market moves in one direction and the momentum stalls, expect a reversal. The backdrop will improve as major companies start posting results in the next two weeks. As gloomy has the pullback this morning seems, I still expect the market to challenge the all-time high in the next week. Watch support and look for opportunities to get long. . .

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