New Market High Likely This Week – Stocks Will Float Higher On Light Volume

November 21, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - The market is one small rally away from a new all-time high. Seasonal strength and a holiday shortened week will help us breakout. Stocks are likely to inch higher this week and there is no news to stand in the way. Stocks are pushing higher this morning before the open. Once we crack through the all-time high we should see follow-through. I'm not looking for an explosive move, just a gradual tick higher. Shorts are not going to stand in front of this move and the volume will be very light. Even a small bid can float stocks higher. If my memory serves me, Black Friday is typically weak and cyber Monday the market rebounds. I usually take Black Friday off and I plan to do so again this week. The key to a year-end rally is the perception that Trump's economic policies will lead to economic growth. Analysts believe that his plans could add .4% to GDP growth and $10 to S&P 500 earnings. This improvement with allow us to shoulder a quarter-point rate hike in December. We can expect nervous jitters when the FOMC raises interest rates. There is another potential speed bump. Italy is dangerously close to a financial collapse. More than 1/5 of their bank loans are considered "trouble" and 40% of Europe's non-performing loans are in Italy. They will have a referendum on December 4th and this is an event we need to watch. Brazil and Russia are also in bad shape and a quarter-point rate hike will impact emerging markets. Credit will not be an issue this week and we will focus on the long side. Today I will be very patient during the first half hour. I want to make sure that the bid is strong. We had a nice positive open on Friday and it faded quickly. Stocks never recovered and patience last Friday kept us out of trouble. Support is at SPY $218.25. If the market holds the early gains and it trades above the first hour high I will trade from the long side with confidence. I will use that first hour high as my guide. If it fails, I will let the market come in before taking new long positions. If the market falters and the downside is tested I will wait for support. This dip will provide an excellent entry point and it will give me time to identify relative strength. The volume will be light this week so it's important to set passive targets. Look for a gradual grind higher this week and a new all-time high on the S&P 500. . . image

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