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A Short Will Set-up Soon!
www.oneoption.com
The market is in a downward sloping trading channel.
PRE-OPEN MARKET COMMENTS WEDNESDAY – Bull markets die hard. The long-term trend has been higher and buying dips has worked. The pullback to the 100-day MA attracted some buyers Monday and the SPY is back above the 100-day MA. Your trading approach is to wait for this bounce to stall near the 50-day MA. That would be another lower high and that would be a great place to enter shorts.
Will the market stage a Gap Reversal today? It’s possible, but I won’t know until I see the price action. The odds are not particularly high for that. This bounce is still “young” and there are some shorts who will be forced to cover. That needs to run its course. JPM, WFC and C are flat to a little higher after reporting earnings. The CPI was OK, but not good enough to justify this move higher. The complete focus was on the core number (.2%). Trump’s inauguration (January 20th) could also attract some buyers.
The selling pressure the last month has been steady. I feel that the market is transitioning and that lower prices are ahead. We have seen the market spending more and more time around the major moving averages without any lift off of them. That is a sign that sellers are taking gains/reducing risk.
Given that backdrop, I would not be chasing this move higher. Gap and Go formations are fairly risky especially after a big gap up like this. The chance of having the rug pulled out is high.
Retail sales and initial jobless claims will be fairly important tomorrow.
If I get weakness into the gap in the first 30 minutes of trading, I will trade a gap reversal (small). I suspect that most of the gap will be preserved. If by chance this market gets smacked down today… look out. That would be a very bearish sign for the next few weeks.
Support is at AVWAPQ and resistance is at the 50-day MA.
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