The S&P 500 has rallied 100 points in two sessions. Here’s what I expect today.

PRE-OPEN MARKET COMMENTS MONDAY – Earnings and interest rates drive the market and we are going to get a heavy dose of both this week.

MSFT, META and GOOG will report this week along with companies from every sector. The reactions so far have been relatively muted and they have not been the reason for the big market run up.

The Fed is likely to cut rates this Wednesday and they could signal another rate cut this year. The government shut down continues and that is creating uncertainty. It will weigh on economic growth and job creation. There have been a few subprime failures and banks have been tapping the Fed’s overnight repo facility. This is a sign that liquidity is tight and that is another reason for them to be dovish. CPI was lighter than expected so they have some breathing room. This backdrop has contributed to the market rally.

I know this is counter intuitive, but it’s how the market works. You would think that a government shut down, tight labor conditions and credit concerns would lead to a market decline. Historically, the market has moved higher for a few months after the first rate cut. When the rate cuts fail to simulate economic growth, the market pulls back. This won’t be a concern this year, but it could be next year.

There has not been any movement by either side and the government shutdown could continue for a few more weeks. This is starting to impact people and on November 1st, that number will expand as food stamp and other social programs run out of money. The market is currently discounting this event.

Trump and Xi will meet this week in South Korea. Rumor has it that they will continue rare earth shipments for a year. That sparked a major overnight rally. Domestic mining start-ups are going to continue at full speed and the US will not repeat this mistake. China can’t be trusted. They make promises and they renege all the time. For the time being, the news is good.

The market has entered a seasonally bullish period of the year. Asset Managers like to mark portfolios up into year end. That increases bonuses and management fees so there is disincentive for them to sell. A sellers boycott is another reason why the market is moving higher. The market can rally on light volume if there aren’t any sellers.

A Fed rate cut has been expected, the earnings reactions have not produced huge gaps up, we can’t trust China, there are credit concerns and we don’t know the true state of our economy (no data due to the shut down). I won’t be chasing this gap up. I’m not bearish, I just won’t be chasing.

Gaps up to a new all-time high are typically faded. I will wait for a pullback or a compression. It’s very possible that we have a repeat performance of Friday where we gap up and sit.

Support is at the high from Friday and we are through all meaningful resistance.