We have been expecting a pullback and this will set up buying opportunities.
PRE-OPEN MARKET COMMENTS FRIDAY – The S&P 500 has run up 12% in a month on relatively light volume. The interest rate hikes to date will take time to filter through the economy and until then, Asset Managers will remain relatively passive. We saw a smack down from the 200-day MA this week and the market has not been able to get back to that level. I have been referencing this in my comments. The Fed is staying hawkish until they see economic weakness or a material decline in inflation. That was clear from the minutes Wednesday. There was some Fed speak, but it was similar to what we saw in the minutes. This pullback is not a surprise, we have been expecting it.
Swing traders should have their bullish put spread candidates lined up. This is your chance to watch how they perform in a weak market. We want those breakouts to hold and we want to see relative strength in the stock. When the market shows signs of support we are going to sell those bullish put spreads below technical support for the stock. The strength of the move lower will tell us how much more downside there is.
Day traders will have some action today and I welcome the move. The alternative was compressed trading in a tight range. The low from the week will be tested on the open and that is the first horizontal support. A wimpy bounce on the open (fills much less than half of the gap) will set up a nice short. This is a pretty decent gap down. 1OP is in a bear cross so I believe we will start on a weak note. Mixed overlapping candles will be a sign that the bid is still relatively strong. Watch for a possible downward sloping channel. Those tend to end with a selling climax and with this pattern a buy will eventually set up later in the morning. Stacked red candles will be a sign of weakness and a possible bear trend day. I feel this is unlikely. Bulls will not throw in the towel that easily after the buying we have seen the last month. Let’s see what the bearish cross brings and let’s gauge the selling pressure by reading price action. I will provide comments at key junctures, but as always, 1OP is your guide.
Support is at $417.50 and $424.50. Resistance is at $428.50 and the 200-day MA