Watch For Market Support Into Earnings Season

April 18, 2022

Posted 9:30 AM ET – Last week the market was bipolar. We saw big drops one day and big rebounds the next. Longer term swing traders with a 3-4 week trade duration should avoid this nonsense. The S&P 500 is below the 50,100 and 200 day MAs. I am expecting support over the next two weeks as earnings season kicks into high gear. Unfortunately, any support will be short-lived. Asset Managers will get very nervous as we get into May.
Inflation is putting upward pressure on interest rates. Last week the CPI showed an incredible 1.2% increase. Bonds took a beating and they closed at 52-week lows. Higher interest rates are going to provide a still headwind for the market.

DIDI is going to be delisted and there could be many other Chinese companies in the regulatory crosshairs. China is the biggest market threat. Real estate defaults, Covid-19 outbreak, soft economic numbers, a stock market sell off and a possible trade war with the world over its support for Russia are a concern.

I read an interesting article this morning about office occupancy rates in the US. In the largest 10 cities the occupancy rate is 43%. Much of this is due to “work from home”, but you have to wonder about credit risk for these developers. Big city sales tax revenues will also decline as workers stay in the suburbs. Not an immediate risk to the market, but how does this gets resolved in coming years?

Swing traders should stay in cash. I was hoping to see more market support at this stage into earnings season. If I saw that support I would have suggested selling some very short term bullish put spreads. That “window” of support could be very short term and I don’t want to get cute force a trade when I feel that nervous jitters will increase as we get closer to May.

Day traders are in the driver’s seat. Just wait for the momentum to be established for the day and ride the wave. Much of this action is program driven. Bank earnings have not been great and they will dominate the scene this week. Given the 50 point up, 50 point down, 50 point up action last week I can’t give you clear instructions. Be patient and use 1OP as your guide. Right now the trade signals for SPY all favor the short side so that is my bias.

Support is at SPY $430 and resistance is at the 50-day MA and $444
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