Yesterday the market posted solid gains and it rallied above the 50-day MA. The buying started right from the open and it was not a news related rally. That means that everyone had a chance to buy on the open and it legitimizes the move since it was not news driven. Earnings season typically attracts buyers. I will not be a “believer” until I see back to back gains and a close above the 200-day MA.After the close yesterday NFLX lost 200K subscribers when a gain of 2.5 million subscribers was projected. The stock took a pounding after the close. IBM posted solid numbers and it is up after reporting. TSLA will report earnings after the close today. Higher raw material costs and Covid-19 related production issues in China could be problematic. We will see. Guidance will be critical for all companies this quarter.
There is “Fed speak” today at 10:30 AM ET and 11:30 AM ET. I don’t believe we will learn anything new. One of the most hawkish Fed officials (Bullard) said yesterday that he could make a case for a 75 basis point rate hike in May, but that is not where he stands.
Swing traders with a 3-4 week trade duration need to wait for a close above the 200-day MA. I want to see some stacked D1 green candles. That will tell me that buyers are aggressive and that they are in control. Anything less will tell me that the market is directionless and that this bounce will easily reverse once the momentum wanes. The May FOMC is going to keep Asset Managers very nervous and there is a good chance that we will see back-to-back 50basis point rate hikes.
Day traders should watch the early rally this morning. There is stiff resistance at $448 and I want to see us march right up to that level. Stacked green candles and a gap and go to $448 would be bullish, but I doubt that is going to happen (10%). Instead I believe that the market will try to add to gains from Tuesday and that the rally will fall just short of that resistance (30%). Buyers will wait to hear from TSLA. It is a mega cap tech company and it will give us insight into how bad Covid-19 conditions are in China. Another likely scenario is a wimpy rally and then a drift lower (30%). Fed speak will be a splash of cold water this morning and it could keep a lid on the rally. I do prefer trading from the long side today.
Support is at SPY $436 and resistance is at $448.