MARKET WANTS TO BOUNCE – WAIT FOR CLARITY NEXT WEDNESDAY
Posted by Pete Stolcers on November 02
Posted 9:30 AM ET – Yesterday the market finally survived the last hour of trading. Stocks closed on their high of the day and the long-awaited bounce could be starting. We still need to get through the FOMC and the elections next week. Strong employment is overpowering weak guidance from Apple and the S&P 500 is up 15 points before the open.
Apple was the last mega cap tech stock report. Higher selling prices are prompting users to hang onto phones longer and guidance was lowered. In general corporate earnings have been excellent, but the comparatives will be much tougher next quarter. At a forward P/E of 15, stocks are reasonably priced.
The Unemployment Report came in at a robust 250,000. Hourly wages increased .2% and that gives the Fed some breathing room. In my opinion this was the most critical part of the report and the S&P 500 is up on the news.
The FOMC meeting next Wednesday needs to address a slowdown in global growth and the tone needs to soften. If the December rate hike is postponed the market will rally. To date, the Fed has been very hawkish. If a December rate hike is still on the table the market will have a negative reaction.
The elections next week will also be very important. Democrats are likely to take the House and Republicans will maintain control of the Senate. This outcome would be neutral to slightly bearish. Republicans have momentum and the market would rally if they maintain control over Congress.
Swing traders should stay sidelined. A strong close yesterday combined with follow through this morning is bullish. I also like the fact that the market was able to overcome a negative reaction to Apple’s earnings. I don’t want to take a position ahead of two major events next week. As good as the rally this morning feels, I don’t see Asset Managers loading up after a very heavy month of selling.
Day traders should make sure the early gains hold. Opening gaps higher have been faded. I am going to let the early action play out and I want to buy a pullback. Resistance is at the 200-day moving average ($276.20).
Global economic conditions are softening and ISM manufacturing came in light yesterday. Trump’s tweet about a sweet trade deal with China is lipservice ahead of the elections. The meeting with Xi is still a month away and we won’t see a trade deal for many months.
I’m expecting choppy conditions ahead of next Wednesday and I want to wait for clarity.
Market commentary provided by OneOption, LLC a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.