The Market Is Trapped In a Range

October 19, 2022
Author: Peter Stolcers, Founder of OneOption

Earnings and the FOMC should result in a breakout one way or the other.

PRE-OPEN MARKET COMMENTS WEDNESDAY – The market is trapped in a range near the low of the year. Buyers are active when the market tests support and sellers are active when the market tests resistance. Earnings season will kick into high gear next week and traders will watch guidance very closely. Until the SPY can break above $380 or make a new low for the year, expect more of the same.

AAPL is reducing production of iPhone 14. Overnight “beats” include NFLX, ISRG, UAL, JBHT and IBKR. TSLA will report after the close today. MSFT, GOOG, META, AMZN and AAPL will report next week.

The UK is going to start issuing bonds again. Their fiscal house is a mess. China did not report key economic releases. Perhaps that is because they were weak and the Commies want to keep things upbeat during their conference.

Buyers are looking for any sign of support. Asset Managers are cash levels have not been this high in 21 years. That money has to go somewhere and on a “real” basis cash is losing value because of inflation. They are looking for a year end bounce (I am in this camp). By the way, the absence of a year-end bounce would be very bearish.

Sellers believe that the Fed is going to drive us into a deep recession. Inflation remains persistent and there are warning signs that consumption will be weak during the holiday. This in turn could spark credit issues.

Earnings season will climax next week and the following week the Fed is likely to hike rates by 75 basis points. There are plenty of market drivers in the next two weeks.

The SPY is trapped in a range and we are seeing long mixed candles with overlap. This is a low probability trading environment. Keep your swing trades to a minimum and be patient with your day trades.

Support is at $368 and resistance is at $375.

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