A Big Market Breakout Is Coming

January 19, 2023
Author: Peter Stolcers, Founder of OneOption

Don’t pay attention to the headlines or the major MAs. This wedge is all that matters.

PRE-OPEN MARKET COMMENTS THURSDAY – It’s all about the wedge that is forming on the daily S&P 500 chart. The 50-Day, 100-day, and 200-day MAs are inside of that compression and they are being crossed with frequency. Be mindful of them when day trading, but don’t expect follow though.   

The longer term trend is down so I give that High- trendline more credence.

You can slice and dice the headlines any way you want, but the same forces that were in play eight months ago are attracting buyers and sellers. One day the bearish influences are in focus and the next day the bullish influences are in focus.

Bulls – The Fed is slowing the pace of tightening, job growth is good, inflation is starting to ease, corporate buybacks are at record levels and cash is at a record $4.8T.

Bears – The yield curve is inverted, the Fed is not done tightening, no one is considering the balance sheet run-off, China is shutting down because of Covid-19, the debt ceiling will be hit and prices remain high.

Buyers and sellers are paired off. That is why we are seeing decent volume on these moves both ways.

We are going to get a breakout. I don’t care which way we go, I am just watching the technical and not the headlines. I urge you to do the same.

Longer term swing traders should keep their powder dry until we know which way the market is going to break.

Day traders, we are back below the major MAs. Yesterday was a nice bearish trend day and this morning we have follow through selling. Stay very flexible. I suggest keeping swings to a bare minimum. If you carry overnights, keep them very short term and try to have a balance. Three Fed governors speak today so expect intraday volatility.

Support is at the D1 Low+ and resistance is at the High-. Everything in between is shit. We are crossing these MAs at will. If we get through them with ease, go with the flow. If we hang around them, look for a reversal.

Trade well.

Watch for a breakout from this wedge formation.

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