Buyers and sellers are battling it out and we are seeing large swings. Tread cautiously.

PRE-OPEN MARKET COMMENTS TUESDAY – A bullish scenario would have been a brief test of the 50-day MA and a bullish hammer off of it 10 days ago. We had that pattern and the market bounced. That confirmed support and it should have been off to the races. That didn’t happen and the market retested the 50-day MA a second time last week. That’s not the end of the world, but it is less bullish. Buyers should have taken comfort knowing that support was forming and we should have taken a chunk out of last Thursday’s red candle yesterday. Instead, we took a chunk out of Friday’s green candle. That is bearish.

During a bullish market we want to poke at major moving averages and we want to fly off of them before they are even tested. That is a sign of aggressive buying. When the market lingers around them, it is a warning sign. Yes, that support could hold, but buyers should have been aggressive and they weren’t. The longer we stay near it, the more likely we are to fall below it. That’s where we are with the 50-day MA right now. I believe the odds of testing the 100-day MA are fairly high in the next week.

Overseas markets were red with considerable losses. There is a headwind today.

HD is getting hammered after reporting earnings (sorry, couldn’t resist). NVDA will report tomorrow after the close Wednesday and that will set the tone for tech stocks. WMT and TGT will report this week and given the low readings from Consumer Confidence, I am expecting poor results.

Thursday the BLS will release the September jobs report. Conditions were slipping heading into that number and whatever the results are, we know they are worse now. The shutdown will reduce Q4 GDP by 1.5% according to most estimates.

Japan reported a better than feared decline of -.4% in the advanced Q3 GDP reading yesterday. Global economic growth has been deteriorating well before the tariffs and there is no growth engine.

The Fed’s overnight repo facility has seen a lot of activity and that signals liquidity issues. They held a special meeting with primary bank dealers last weekend. Financials were hit hard yesterday and the XLF closed at the 200-day MA. That support is being breached before the open this morning.

I don’t have a lot of swing positions on right now. I have 3 PCS that are in good shape and 3 naked put writes that I am willing to take assignment on. I also put on an overnight hedge and I am short /ES. My risk exposure is light.

This is a great time to day trade. The intraday swings have been huge. If you are on the right side, watch for signs that the momentum is slowing and take gains. Buyers and sellers are both able to move price. No question, there are more good shorts coming up on our searches than longs. We are likely to test the downside this morning.

Our best case scenario is a wimpy bounce into the gap with mixed overlapping candles. That will give us time to enter shorts and to find relative weakness. A more difficult set-up is a drop below the low from Monday. If it happens on the first attempt, wait for follow through. You don’t want to bite on that move and then have the market bounce. If the breach gains traction, we are likely to keep going lower.

Support is the low from Monday and the overnight low ($660). Resistance is the low from Friday ($663.27) and the 50-day MA.