The market is nervous that trade wars could erupt.

PRE-OPEN MARKET COMMENTS WEDNESDAY – Today President Trump will reveal his tariff plan and the market hates uncertainty. This news it not a surprise and it has been widely broadcasted by Trump even before he was elected. The global economic backdrop is a greater concern.

Economic growth has been slowing in Europe and in China for well over a year. Central banks around the globe are more concerned about the threat of a recession than they are inflation and that is why they have been cutting interest rates. The Fed has been steadfast and we can expect “higher for longer”.

This morning ADP reported that 155K jobs were added to the private sector in March. That was a good number and it is well above the expectations. It was also a big rebound from last month’s number (77K). One of the Fed’s mandates is to preserve job growth and this will give them more breathing room. I believe Friday’s jobs report will be solid as well because we have not seen a spike in initial jobless claims the last few weeks.

We’ve seen signs of an economic slowdown and that has been confirmed by corporations that have recently reported earnings. In the next few weeks I believe we are going to see cautious guidance as earnings season unfolds. I don’t have to rely on the fundamentals, I can see the selling pressure in the price action recently. Asset Managers are in “risk off” mode.

Bull markets die hard and we can expect bounces after a major market decline. The S&P 500 fell 300 points in four days when it gapped down Monday and that is a huge move. The bounce off of that low should not have been a surprise. That rejection off of the 200-day MA and the speed with which we tested the low from a few weeks ago tells us that sellers are in control.

From a longer-term swing trading standpoint, be short and give yourself lots of breathing room. There will be bounces. When the bounces run out of steam, that is when you want to consider adding. Make sure the bounces are brief and shallow and that resistance levels are preserved.

From a shorter-term swing trading standpoint, you can take overnight shorts after bounces. Exit into any big drops especially if they are gaps down like we got Monday. Wait for the next bounce and reload.

From a day trading perspective, stay flexible. Don’t get married to one side or the other and expect two-sided action. Buyers and sellers are engaged right now because there is major news pending. I would not look for a bullish trend day unless we get above AVWAPQ and I would not look for a bearish trend day unless we are below SPY $550.

My favorite set up right now is wimpy moves higher to start the day. I am watching for mixed overlapping candles and light volume. That rally can come off of a bounce when the market gaps down or it can be an opening move higher. I don’t really care. Once that move stalls, I want to trade the short side. That aligns with my longer-term bearish bias and if I get “stuck” in a trade I can consider holding it overnight because I have a market tailwind I can lean into. On the long side, I have to be much more careful with my entries because I do NOT want to hold longs overnight. That means I am taking profits earlier and I am trading smaller size.

Our best set-up today is a wimpy bounce into the overnight gap. When that stalls we will have a nice window to short stocks that are relatively weak.

Support is at the low from yesterday and resistance is the high from yesterday.