Daily Commentary: January 17, 2025

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Can the Market Breakout?

Posted by Pete Stolcers on January 17
www.oneoption.com

This morning the SPY is testing the 50-day MA.

PRE-OPEN MARKET COMMENTS FRIDAY – This is the move I’ve been waiting for. The market is going to test the 50-day MA this morning and a minor downward sloping trendline. My theory is that we are in a downward sloping trading channel and that the selling pressure is building. That’s what the price action suggests. In this type of a pattern you short when resistance is confirmed at the upper end of the trading channel and you take gains when the market drops to the lower end of the trading channel. It’s not an easy pattern to trade. In the early stages of a market transition, buyers are still engaged. They have been conditioned to buy dips and they will keep doing it until it doesn’t work.

This is a critical juncture for the market. The economic news has been decent the last month, but the market has not been able to rally to a new high. I believe that the selling pressure is building and that many Asset Managers feel the undertow. They are not going to wait for bad economic numbers (which are backwards looking), they are reducing risk now. Trump’s inauguration could spark some buying and I am looking for a push higher in the next two days. If the market breaks out and it keeps running, I will let it go. I do not like the backdrop. His policies will not take effect for months and I feel that the data points are going to soften.

If the market gets slapped down after trying to breakout through resistance, I will have the confirmation I need to take swing shorts. Right now, I’m in a holding pattern. I am not going to guess the outcome, I am going to wait and I will trade what I see and not what I think.

Yesterday in the chat room I predicted that China’s GDP would be 5%. LOL! It came out at 5.4%. If you believe that, I have a bridge I can sell you.

Pay very close attention to this attempted breakout. Are you seeing nice long green candles on heavy volume or are you seeing mixed overlapping candles on light volume. As a bear, I want the latter.

Support is at AVWAPQ and resistance is at the 50-day MA.

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