Daily Commentary: January 29, 2024

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Big Market News Ahead – Here’s the Game Plan

Posted by Pete Stolcers on January 29

Mega cap tech earnings, economic releases and the FOMC are on deck. Expect active trading.

PRE-OPEN MARKET COMMENTS MONDAY – Lot’s of news pending this week. We’ve seen some resistance the last 3 days. We might see a slight upwards bias today.

Mega cap tech earnings:

Tuesday: AMD, GOOG, MSFT

Thursday: AMZN, AAPL, META


Wednesday: ADP, FOMC

Thursday: ISM Manufacturing

Friday: Jobs Report

Over the weekend regulators are forcing Evergrande into liquidation. This is a $300B property developer in China and it has been on the ropes for years. This is a reminder that credit conditions in China could deteriorate.

I believe that earnings reactions will be mixed. The news will be good, but stocks have run hard the last 3 months and good news is priced in. That means that upside reactions are fairly limited. We want the market to tread water this week. That would be a sign that buyers are content and that profit taking is minimal.

The economic news has been solid and I expect that to continue. GDP was better than expected last week and initial jobless claims have been low so the jobs report Friday should be good.

The Fed is likely to splash a little cold water on the market Wednesday. They won’t be in a hurry to cut interest rates and the market won’t like that because it is addicted to “easy money”. There is no reason for the Fed to waiver from their hawkish stance. They got inflation wrong in 2022 and they are not going to make that mistake again. Core inflation has been slow to retreat, economic growth is solid and there are not any signs of a credit crisis. They have plenty of breathing room and they will not feel any pressure to ease.

Long-term swing traders with a 2+ month time horizon should hold longs. Expect to take a little heat in the next week. Dips will be brief and shallow. We have not seen any signs of heavy selling and this dip should only last 5-10 days.

Short-term swing traders with a month or less time horizon should take gains on longs before the close Tuesday. This has been a nice push higher and the candles are tiny and the volume has been fairly light. I believe the upside returns heading into the news are smaller than the downside risks. If you are long option premium, your longs will pullback and it could take the market a couple of weeks to recover. During that stretch your options will lose money due to time decay. The hour is late, take action and exit into strength. We will be looking to reload in the next week or two.

Day traders should focus on the long side. I believe that shorts will be passive into major news events this week. No dips during the last 3 months tell me that long-term buyers are still interested and they have been able to offset any supply from profit takers. We could see a small push higher today. If we were going to get a better rally into the news this week we would have seen better price action last week. Tuesday is going to be dull ahead of major tech earnings and the Fed.  

I am bullish!!! The market takes two steps forwards and one step backwards. We need to take gains into strength and wait for pullbacks to reload. This approach reduces our risk exposure and we are able to evaluate the depth and duration of the dips. That helps us to gauge the strength of the market and what to expect from the next rally.

Overseas markets were mixed and they won’t have much of an impact today.

Support is at SPY $480 and resistance is at SPY $490 and $500

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