Look for a light volume day ahead of news releases.
PRE-OPEN MARKET COMMENTS TUESDAY Posted 9:30 AM ET – – The headlines over the weekend were mixed and the gains from Friday are being erased this morning. This is a busy week for economic releases and earnings season will start next week. I am expecting light trading today ahead of those events.
ISM services will be released Wednesday morning and the FOMC minutes will be released in the afternoon. ADP will be posted Thursday and the jobs report will be released Friday. Any weakness in those numbers will weigh on the market, but I believe the numbers will be fairly decent. Initial jobless claims have been steady the last 4 weeks so I am not expecting a big drop in jobs.
China’s services PMI came in better than expected. They are still battling Covid-19 and new cities have been shut down. Many analysts have been vocal about the numbers being fabricated and the analysts are citing many conflicting data points that suggest much slower activity. China started off strong overnight and the gains faded.
Earnings season will start next week and the comps will be tough. Estimates have been lowered and that should make it easier to “beat”. Guidance will be critical and the impact of supply shortages and higher input costs will be revealed.
The market trend is lower and I believe it will stay intact through early September. The effects of interest rate hikes will not be felt for a few months. Asset Managers will wait to see how this plays out and typically the market gets very nervous when no one is minding the shop. The Fed and politicians will flee DC during recess in August. Any weak economic numbers could spark selling and we could get the capitulation low we are looking for. The Fed still plans to hike in September and that will cast a dark cloud over the market. I am expecting another round of selling in the next two months, but I believe that most of the bad news is priced in and that we will establish longer-term support in the next two months. This fall, inflation will start to ease, Covid-19 in China will start to fade and the market will be numb to the war in Ukraine. I want to see that “air-pocket” low in Aug/Sept.
Day traders should watch the early action. I saw mixed headlines (good and bad) overnight. The market started off on a strong note last night and then the action turned negative. A “holiday hangover” is likely and the volume will be light. There will be some economic news Wednesday and the action will pick up. These clues tell me the action is going to be choppy today. Wait for your windows of opportunity.
Support is at SPY $372 and resistance is at $382.50.