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Market Holding Gains
www.oneoption.com
The calendar is light and there is nothing to stand in the way of the rally.
PRE-OPEN MARKET COMMENTS WEDNESDAY – Market surprises yield big reactions. Heading into the weekend China and the US were exchanging harsh rhetoric and the fact that they were meeting was a step in the right direction. Based on previous trade negotiations, deals with China have taken time. This time, the stakes were too high and both sides reached an agreement.
The price action below major resistance was patchy last week with tiny bodied candles and light volume. I thought that a deal would take time to forge and that during a light news cycle that resistance would hold into next week. In an instant, the market has renewed life and the gains have held.
This was a powerful breakout and much of it was mechanical. Stops were triggered and that fueled the move. I am expecting the 100-day MA to be retested. If that happens in a wimpy fashion, it will tell me that the bid is strong. That dip will provide a good entry point for longs. If we see stacked red candles it is a warning sign that sellers are back in force and that this could be a failed breakout.
I’m not prepared to chase this move higher. There’s no news pending that could splash cold water on the market and a gradual drift higher is possible. I will day trade from the either side, but I don’t view this as a good entry point for longer term swing trades.
That is my opinion and I know this is where I am at mentally. If you’re confident that this is the real deal and that the market is going straight to the all-time high, trade it. If I started to load up here and the market drops, I won’t be able to weather that move. I would puke out of the positions for a loss and I would be frustrated with myself. I am still not convinced that this breakout is legitimate and the issues that caused me to be bearish are still present.
My market opinion drives everything I do.
The fundamental backdrop is bearish and that persists. I trade what I see so I focus on the technicals.
I will respect the breakout, but I will not chase. At some point there will be profit taking and I want to see how aggressive it is. When I have that information I will be able to determine if I am comfortable entering bullish swing trades.
I’m going to focus on day trading. The market will open slightly higher and foreign markets were mixed overnight. I like the breakouts in tech stocks, but I won’t buy until I get a market dip. I need confirmation that buyers are engaged. If the first move is wimpy and up, I will not have an issue shorting weak stocks.
Bullish speculators are loaded up and they are weak hands. They will easily be flushed out at some point and I don’t plan on being one of them.
Support is at $583.40 and resistance is the all-time high.
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