The strength of this market bounce was not unexpected. Tough sledding from here out.

PRE-OPEN MARKET COMMENTS THURSDAY – The market has rebounded nicely and it has broken above major resistance at SPY $550. The S&P 500 has rallied 200 points in the last 24 hours and all is right in the world again… or is it?

Earnings from MSFT and META produced big positive reactions and the S&P 500 rallied 100 points after those announcements. A rare earth deal with Ukraine has also been announced. We also know that trade deals are pending. So why the pessimism?

1. Earnings are not impacted by the economic slowdown yet. We are just starting to see signs of deceleration and we have not seen the worst of it. Companies loaded up ahead of the tariffs and this supply of inventory will take time to work off. That means production will grind to a halt in coming months and you can already see that in the port activity.
2. The Ukraine deal is all optics. In reality the war wages on and those mines will take many years before they produce anything meaningful.
3. The trade deals will take some of the uncertainty out of the equation, but the 10% base rate is still significant and it will cause supply disruptions. That is actually intended because Trump wants that production to move to the US. This is going to take time.
4. The budget deal and the tax cuts would be significant and that could happen in the next month.
5. Direct foreign and domestic investment is going to provide economic growth, but not for at least a year. It takes time to draft those plans and to get regulatory approval… even if the red tape is cut.
6. Global economic growth is weak and this blow to China could create a credit crisis.

When you are trading, you don’t have to justify your thesis to anyone. I post my thesis publicly, so have to constantly swat these gnats away. Opinions are like assholes… everyone has one. The “gurus” who want to criticize my thesis come crawling out of the woodwork. I don’t know who they are and they have no track record to back up their statements, but they have an opinion and they all sound very convincing. A few months later they are gone and a new crop of “gurus” sprouts.

Don’t follow me, learn from me. I am giving you all of the information that goes into my thesis so that you can do this. The technical breakdown was real and it was justified. That was the warning shot over to bow. When this bounce runs its course a good short will set up and that is what I am focused on longer term.

This morning initial jobless claims came in at 246K. That is the hottest reading we have seen in two months. We haven’t seen the impact of all of the government layoffs yet, but it’s coming. In the last two years the government hired 700K workers. They government is hot hiring, they are laying off workers. This is a double whammy that is going to be felt. Q1 GDP fell to it’s lowest level in two years. Global weakness is just starting to spread to the US. ISM Manufacturing will be released today after the open and tomorrow and the Jobs Report will be released tomorrow.

I’ve been expecting this bounce and I knew that we still had some potential upside catalysts in the next two weeks. When these events run their course, market resistance will form and the undertow will build. That is the moment I am waiting for and the next big move will be down. That could take a month to materialize and I will be waiting patiently for that window. I know the technical signs to watch for.

Swing traders should stay sidelined for now. Patiently wait for the signs I am describing and know that your time to feast is setting up on the short side. Rejoice as the market struggles to advance. This move is draining option IVs and they will soon be affordable again. The higher the market moves, the better our entry point will be.

Day traders should be cautious today. This is a big move and the upside after a 200 point move in 24 hours is limited. We still have big news pending. AAPL and AMZN will report after the close and the jobs report is tomorrow. We have seen two-sided price action the last few weeks and sellers are going to test the bid. I believe that the market will struggle to advance today. This is also a legal holiday in most of Europe and that will reduce the volume.

Support is the 50-day MA and resistance is the 200-day MA.