Daily Commentary: April 08, 2024

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Market – Yellow Flashing Light

Posted by Pete Stolcers on April 08

The long red engulfing candle from last week tells us to proceed with caution.

PRE-OPEN MARKET COMMENTS MONDAY – Last week the market was testing the all-time high and a gap up resulted in a very long red bearish engulfing candle. These gap reversals off of a new high are a warning sign. This one was particularly long and it came on heavy volume. That makes it more legitimate.

Does this instantly signal a market top? No! It does make me less bullish and I discuss that in this week’s video. From a bullish stand point, we want to see the market make a new all-time high this week. That would instantly erase that long red candle and it would tell us that buyers are still firmly in control.

The economic data points from last week were good. Job growth is strong and wage inflation was inline (.3%). This week we will get the CPI. The Fed has mentioned that they still see persistent inflation. There was plenty of “Fed speak” last week and it’s possible that they do not cut rates until this fall (if then). The economy is strong and there is no need for them to cut rates. TLT has been drifting lower as a result and interest rates are ticking higher. This is putting a little selling pressure on the market.

Earnings season will start Friday. The big banks will dominate the releases and the results should be good. I believe the reaction will be market neutral. Financials have rallied hard so good news is priced in. They will tread water. Then we will wait for mega cap tech earnings. The market bid is typically strong into those earnings releases.

There is plenty of speculation on why the market had such a big pullback last Thursday. I don’t really care what caused it. Institutions have demonstrated a willingness to reduce risk at this level and that is all I need to know. If buyers were aggressive, we never would have seen a decline of that magnitude.

The price action this week will be very telling. When buyers and sellers are paired off, we can expect lots of intraday movement on both sides. Take that into consideration when you are day trading. Strong moves in one direction that stall out will reverse.

Support is the low from Thursday and resistance is the high from Thursday. We are right in the middle of that range.

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