Fed Speak Likely To Be Hawkish Today – Watch For Selling the Rest Of the Week

Posted 9:30 AM ET - Yesterday we saw little selling and the market tested support at SPY $217.50. Janet Yellen is speaking in Jackson Hole and the comments today should be hawkish. There will be a nice shorting opportunity today. Labor conditions have improved and Brexit was a non-event. I've been telling you all week that I am expecting selling pressure. Asset Managers are not going to aggressively bid for stocks near an all-time high. They are also aware that August and September are seasonally weak months. In this light volume environment even a small round of profit-taking can push the S&P 500 down 20 points. I am going to use SPY $217.50 as my guide. I plan to short stocks and S&P futures if that level is breached and I believe the downside will be tested early. I bought some SPY Sept $215 puts yesterday and I will add this morning on weakness. If the market closes above $217.50 I will exit my put positions. I will also be looking for stocks that have compressed at the high end of their range. Once they break horizontal support at the low-end of the compression they will be ripe for shorting. They have plenty of downside and they will easily shed gains as Asset Managers pull bids. Before you get too excited, I should qualify my comments. The market has been absolutely dead for the last two weeks and we finally have a nice little trading opportunity. The key word is little. I'm not looking for a full-blown sustained market decline. I just think we’re going to see a little weakness the next two days. Look for opportunities to get short this morning and use SPY $217.50 as your guide. If the market makes a new low after two hours of trading, we will drift lower all day. There is no news to drive the market other than comments from Janet Yellen. I plan to get short early in the trading day.

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