We’ve seen some profit taking after earnings and the FOMC. Here are the possible outcomes overnight that would be good and bad for the market in the next 24 hours.

PRE-OPEN MARKET COMMENTS THURSDAY – We saw some profit taking after mega cap tech earnings and the FOMC. That was expected and we have another huge round of news pending in the next 24 hours. This will set the tone for February and we will be able to gauge the selling pressure after this round of news.  

Mega cap tech earnings:

Today: AMZN, AAPL, META

Economic:

Thursday: Initial jobless claims, ISM Manufacturing

Friday: Jobs Report

Wednesday ADP reported that 107K jobs were created in the private sector during the month of January. That is considerably less than the 155K that was expected. Initial jobless claims came in a bit high at 224K. The hourly wage component was a “hot” .4% last month and I suspect it could be elevated again this month. Many states increased the minimum wage starting January 1. The jobs report has the potential to disappoint, but not in a major way.

The Fed message was hawkish. Does it really matter if they cut rates 25 basis points in March or June? Not as far as I am concerned. A strong economy is good for earnings, employment and credit. Many of the biggest rallies have come when interest rates are high or rising. If the Fed starts to ease, investors will worry that a recession is coming and that they waited too long.

There is a potential regional bank failure (NYCB). They took some of the obligations from the bank fails earlier in 2023 and that is weighing on the company. From what I have read, this is isolated.

China’s Caixin Manufacturing PMI was good and it remained in expansion territory.

Swing traders should have locked in gains and reduced exposure to levels they are comfortable with this week. Prepare for a normal pullback in a bull market that should not last more than two weeks. When the market finds support, the depth and duration of the drop will tell us how to proceed with swing trades. If we breach AVWAPQ and it lasts longer than two weeks, we will be more inclined to sell OTM bullish put spreads. IVs will be higher and we need to give ourselves more breathing room. If the pullback lasts less than a week and we stay above AVWAPQ we can get more aggressive and favor ITM longer-term calls with 3 months to expiration. That would be a sign that the market still has more upside.

Day traders should expect decent movement today. Buyers and sellers will joust on good volume. The drop after AMD, GOOG and MSFT could gain traction if AAPL, AMZN and META disappoint.

The best case scenario overnight is that 2 of the 3 mega cap tech reactions are good and the jobs number tomorrow is greater than 200K with hourly wages only increasing .2%.

The worst case scenario overnight is that all 3 mega cap tech reactions are bearish and that job growth is less than 100K and hourly wages stay at .4%.

Global markets were down slightly overnight.

Support is at SPY $482.70 and resistance is at $490.