The Fed Chairman will speak at the Jackson Hole economic symposium and traders expect dovish comments.

PRE-OPEN MARKET COMMENTS TUESDAY – The market sold off 10% and it has recovered most of those losses all in the same month. During the drop the volume was heavy and during the bounce the volume has been light. This level of volatility is a sign that buyers and sellers are active.

Economic conditions are fairly stable, but there are some kinks in the armor (July jobs report). The Fed has plenty of breathing room to ease now that inflation is starting to drift down to their target level. Fed Funds futures are pricing in a 75% likelihood of a quarter point rate cut in September and traders expect Powell to confirm this on Friday.

We don’t know which party is going to win the election in November, but we do know that both are promising major stimulus spending. This is inflationary and it might temper the Fed’s enthusiasm to cut rates. If you remember, a year ago a quarter point rate cut was also price in and the Fed did not deliver.

From a swing trading perspective I expect to see continued volatility. The move lower was a warning sign from my perspective and I an watching for signs of resistance at the all-time high. A brief and shallow bounce to the 50-day MA with mixed overlapping candles would have confirmed that Asset Managers are reducing risk and I would have been taking swing shorts on that price action. We didn’t get that. Instead, the market roared right back and that is a sign that buyers are still engaged and that Asset Managers are not aggressively reducing risk. I don’t have a good read on direction and all we know for sure is that we can expect volatility. I feel that we are more likely to see resistance at the all-time high than we are to blow through it between now and the election. I would keep your swing trades to a minimum and I feel that loading up on longer term bullish swing trades would be a mistake.

Last week there were opportunities to hold overnight longs. When we blew through the 100-day and 50-day MAs. Now that we are within striking distance of the all-time high, the headwinds will be stiff. Friday’s press conference will be very important and it is best to wait for the reaction. From a day trading perspective, the bullish searches are loaded with good prospects and the bearish searches are lean. That tells you where to focus. We are in a news vacuum and there is nothing to drive the market at this level except for momentum. Tread cautiously early in the day and wait for a bid check before buying.

Support is at the 50-day MA and resistance is at the all-time high.