This morning the market is going to test a major moving average and we will be able to gauge the selling pressure.

PRE-OPEN MARKET COMMENTARY MONDAY – If you believe that the market sell off was primarily caused by the threat of tariffs, you will rejoice this morning. Trump is going to hold back “some” tariffs. What does that mean? Which ones? When were they going into effect? The tariffs have been a bunch of bluster to throw everyone off balance. The plan changes like the wind and that is by design. Trump likes to make it clear who is in charge and he drives everyone into a tailspin thinking about worst case scenarios. Then he moves back to the middle (which is where he wants to be) and he looks like the “good guy”. We saw this tactic four years ago. 

The market is due for a bounce and I hope this one gains a little traction. I am short (small) and I knew that I might have to weather a bounce. No problem. In my opinion, that will only set up a better entry point for shorts. It will also give me an opportunity to gauge the buying/selling pressure and that will help me determine when the next drop might happen and how far the market might fall. 

My concern is global economic growth. Europe and Asia have been weak for over a year. Central banks have been easing to no avail. THIS IS THE REAL ISSUE. Could tariffs speed up the economic deceleration? Sure, they could be disruptive. If there weren’t any tariffs, economic contraction is still going to happen. 

Global credit levels are at an all-time high. In the US, consumers are tightening their belts and they are cutting spending. The Fed lowered their growth projections for 2025 and they plan to keep interest rates higher for longer. This is going to put even more pressure on consumption. The government has accounted for a huge portion of labor growth in the last two years and layoffs are going to reduce employment. The government is also going to reduce spending and IBM/ACN took a beating on that news last week.

If we look at the price action, how do we want to break a major moving average? We want to blow through it like we did when the market fell below the 200-day MA. Then we want follow through and we had it. The market is comfortable below the 200-day MA. That is not a sign of strength, that is a sign of weakness. If buyers if were interested, we never would have broken the MA in the first place. If we had briefly poked below the 200-day MA and buyers were interested, the market would have jumped off of it like it got jabbed with a cattle prod. We didn’t see that. 

I am still bearish and this bounce is exactly what I wanted to see. During the bounce we want to find stocks that are NOT participating in the rally. If they broke technical support, we want to see them struggle to get back above it. When this bounce is exhausted, those stocks will be your best candidates. I am looking to add to swing shorts, but I am not in a hurry. I have starter positions on and when I add I want confirmation of resistance. 

From a day trading standpoint I feel like the bounce this morning could still be influenced by triple witching and a reaction to the FOMC statement last week. This move feels “fluffy”. Stacked red candles in the first 30 minutes would be a sign of a gap reversal. If sellers are aggressive, they will not mess around. They will smack this bounce down. If the market holds the early gains well, it will try to make it back to the 200-day MA. The upside is fairly limited since the S&P 500 is less than 20 points from that level. I would only day trade the long side. If you overstay your welcome, you will regret it.

It’s Monday. These are typically slow days. We don’t have any specifics on the tariff reductions and they are subject to change. I believe this is an over-reaction. The news the rest of the week is light.

Support is at $570.40. That is a multiple high from last week and it could trigger some buy stops. $563.30 is the next support. Resistance is at the 200-day MA.