Daily Commentary: July 31, 2024

Auto Post1Option Commentary

FOMC Statement Today

Posted by Pete Stolcers on July 31
www.oneoption.com

A whirlwind of news will hit the market this week. When the dust settles next week we will know the direction in August.

PRE-OPEN MARKET COMMENTS FED-DAY – I’ve been encouraging you to stick with day trading and to avoid overnight risk exposure. With these intraday ranges, there is no reason to swing trade. Yesterday the S&P 500 dropped 100 points and today it is going to recapture all of those losses and then some. Traders who “jumped the gun” and called for a market top are going to pay the price this morning.

Microsoft fell after the earnings announcement and it is clawing its way back. It might even open higher. Advance Micro Devices beat estimates and that ignited buying in chip stocks. After the close today, META will report. Tomorrow Amazon and Apple will report. We are getting a heavy dose of earnings releases this week.

The FOMC Statement will be released today. I don’t believe the Fed is going to provide any new information. Economic growth is solid (2.8% GDP growth) and inflation has been easing. The market is near an all-time high and the Fed is in a “sweet spot”. They have the latitude to ease when ever they want and they are going to wait for signs of economic strain. I believe this will bear out in their statement. The market is pricing in a quarter point rate cut in September and I feel that is unlikely.

We want strong economic growth and lower inflation. This is the best backdrop for earnings and this is playing out. ADP was a little light this morning (122K vs 149K expected), but that release had no impact on the market. Official PMIs will be released and Friday we will get the jobs report. I am expecting 200K new jobs and wage inflation of .3%. I’m not going out on a limb, this is where it has been coming in and initial jobless claims have been averaging 235K.

This is a big overnight move and shorts are going to get squeezed. Expect volatility and tread cautiously. Big gaps up have a tendency to stick. We are going to hit a dead spot in the middle of the day just before the FOMC statement.

Swing traders should keep their powder dry for a few more days. The dust needs to settle. Is the market going to make a new all-time high or a double top lower high? We don’t guess, we wait for technical confirmation.

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

Live Trading

Open an Account

Paper Trading

Register