Daily Commentary: January 22, 2018

Scott Green1Option Commentary

Watch the Budget Vote At Noon Today – Extension Will Fuel A Rally


The market is not currently concerned with the government shutdown. If it continues for more than a few days investors will take notice. Republicans are trying to extend it one month and Democrats are flexing their muscles. We could see one of two patterns unfold.

The first pattern is choppy trading where recent gains consolidate near the all-time high. Buyers will be a little more passive and they won’t be able to overpower profit takers in this scenario. Once the “can” is kicked down the road the market will jump.

The second pattern is a continued push higher on the notion that the government shutdown is temporary. Traders will be looking over their shoulders and they will be ready to bail at the first sign of trouble. In this scenario the gains that are made from this point on will be quickly stripped away.

In both cases the market will find support at current levels. The macro backdrop is extremely bullish and dips should be purchased.

Earnings season is cranking up and guidance has been excellent. Corporations are expanding operations due to the tax cuts.

Economic growth is strong. Domestic and international conditions are improving.

Central banks are hawkish and interest rates are creeping higher. Upward sloping yield curves associated with economic growth are market friendly. Credit concerns in emerging markets are low.

Swing traders should maintain call positions. Raise your stops and ride this wave as long as possible. Use SPY $278 as your guide on a closing basis. The bid will remain strong until AAPL reports.

Day traders should look for opportunities on both sides this week. Rumors in DC will create good intraday action. I will favor the long side and I want to buy dips. Politicians have a vote scheduled today at noon and you have to closely monitor news in DC.

The tone and duration of the shutdown will impact the magnitude of this rally. If Democrats dig their heels in could be in for a major battle in February.
As soon as the budget is extended, the market will rally.

Market commentary provided by OneOption, LLC a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content

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