Market Will Drop To the Low End of the Range – 180K Jobs Will Spark Profit Taking

Posted 9:00 AM ET - Yesterday stocks retreated and we spent most of the day in negative territory. An afternoon rally pared most of the losses and the market remains directionless. China's market is closed this week and that will reduce activity. The news this week should have a slight negative bias. A jobs report in the range of 180,000 will lock-in a rate hike in December. This will prompt some profit-taking. We still have seasonal weakness for a few more weeks. Credit concerns are the only thing that can cause a sustained decline. We don't have one, but Deutsche Bank is raising some concerns. Italian banks are also negotiating with the IMF and they are laden with bad debt that they need to write down. The SPY is trapped in a range between $213 and $217. I believe the market will test the lower end of this range after a decent jobs report. ISM manufacturing came in better than expected yesterday and ISM services should be good this week. Good news for the economy is bad news for the market and we should see some profit-taking. We need a sharp selloff, but I doubt we will get one. The 100-day moving average should hold and we will stay in the range. First we will wait for the November FOMC, then the election results and finally the December FOMC meeting. We are finding nice day trading opportunities on both sides. The longs tend to set up better than the shorts so we are focusing on that side. Without a market tailwind we need to set passive targets and we need to take profits as soon as the stock runs out of steam. Use the first hour range as your guide. If we are above it favor the long side and if we are below it favor the short side. It's interesting to talk to new chat room members. Swing traders are taking a greater interest in day trading because the overnight moves are impossible to predict and there is no follow-through. Option traders who like to sell premium are also embracing day trading. They are finding that option implied volatilities are so low that they have to sell close to the money to get a decent credit. The risk is elevated and one small move in the right direction is costly. We love both of these strategies, but we have been forced to adjust our trading and day trading is working well. If you are struggling to make money in this difficult environment, take the one-week free trial. We trade one specific pattern in the chat room and we are extremely focused. There is money to be made in this market. Learn the pattern we trade and when the market breaks out it will be like shooting fish in a barrel. . .

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