Daily Commentary: January 22, 2025

Auto Post1Option Commentary

Post Inauguration Rally Is Underway

Posted by Pete Stolcers on January 22
www.oneoption.com

The market has broken through a downward sloping trendline and it is within striking distance of the all-time high.

PRE-OPEN MARKET COMMENTS WEDNESDAY – My thesis that the market would form a downward sloping trading channel was rejected yesterday when it added to the gains from Friday. The 50-day MA held and the downward sloping trendline that started in December was breached. There isn’t any news to stop the market from making a new all-time high.

The economic releases are light and the last jobs report was great. The market will lean on that information and a “bad number” will only increase the odds of a Fed rate cut. The FOMC Statement is a week away.

What about high stock valuations? They can remain high for a long time. Bank earnings have been good and NFLX posted a great number yesterday and it shot higher overnight.

What about China? We won’t ever get the “real” news from them and they reported 5.4% GDP growth last week. I have zero doubt that conditions there are dire and that they are deteriorating rapidly.

Trump announced a big infrastructure deal centered around AI yesterday and companies are excited about it. This will fuel a move higher in tech. The post-inauguration rally has a full head of steam.

Yesterday was a critical juncture for the market. Would sellers keep a lid on the market as they reduce risk or would optimism break through the resistance level? The market broke out and it is gapping higher this morning. The volume during this move has been VERY light. That is not bearish, it just means that the rally is of low quality. Buyers are overpowering sellers, but they are not excited. These light volume rallies can last for much longer than you would think possible.

The best set-up for us today is a choppy, light volume pullback with mixed overlapping candles where more than half of the gap is preserved. We don’t want to see any long red candles. That will give us time to find good longs and to enter at a good price. That type of price action suggests that buyers are generally supporting the gap up and that sellers are passive. Once support forms, take starter longs in strong stocks and add on confirmation. You can also add on a new high for the day if the price action features nice green candles.

I don’t think we are going to see a gap reversal here, but I will be watching. If the market was going to get slapped down, it would have happened yesterday. I believe that there will be a bid check this morning because we are nearing horizontal resistance at the all-time high.

I am in day trading mode and I would like to see some volume during this move higher to tell me that buyers are genuinely interested.

Support is at the close from yesterday and resistance is at the all-time high.

Live Trading

Open an Account

Paper Trading

Register