News of the Week Hits Wed – Wait For the Reaction

Posted 9:30 AM ET - Last week the market tested the 200-day moving average. That support level held and we are getting a nice bounce this morning. The rally started in Asia and it gained traction in Europe. China posted weak trade numbers. Their market rallied 4% on the notion of government stimulus/PBOC easing. Retail sales, industrial production and foreign investment will be posted Tuesday night and I believe the results will be soft. The recent market crash will impact consumption. If I'm right, the SPY will decline on the news and we could take out the 200-day moving average. If China's economic numbers are in line, the market will bounce and we will float back into the middle of the trading range. We are likely to chop around the 100-day moving average on light volume. The market got a boost when rumors of a cash infusion for Greek banks circulated. This should not have been much of a surprise. Domestic economic releases are very light this week. The jobs report was in line with expectations and the other numbers did not spark much of a reaction. Traders typically take time off in August and trading volumes will decline the next two weeks. Earnings season is winding down and there shouldn't be any big surprises. Our best chance for a trade would come on weak retail sales in China. That would spark a small round of profit-taking and we could breach the 200-day moving average. If the numbers are in line, prepare for the summer doldrums. I will try to sell some out of the money August puts if this plays out. The news over the weekend was not that bullish. The 100-day moving average will provide resistance and this rally should stall. I will be looking for day trading opportunities from the short side. Keep your size small. I might also try to take some time off this week. If I monitor the market, I'm likely to force some trades and I don't want to lose money. Better trading conditions are right around the corner. . .

Daily Bulletin Continues...