The market is going to open much higher today, but this move is going to continue. Here’s why.

PRE-OPEN MARKET COMMENTS TUESDAY – In my comments yesterday I told you that our best case scenario was a gap down in an up trend. The 100-day MA was tested and that support was confirmed. We bounced off of the low of the day and the SPY closed well above the 100-day MA. That was a great entry for longs, we just had to wait for support to be confirmed.

For over a month I have been telling you to watch for a low and to expect a year-end rally. All of my videos for over a month have only featured bullish trades.   

 “But Pete, you told us to watch for a dip last week!” Yes, I did. I told you that if the dip was brief and shallow that would be a sign that buyers were aggressive. The losses only lasted one day (Thursday) and that was a sign that buyers were engaged. “But Pete, you didn’t tell us the reaction to the CPI would be bullish.” I told you that the reaction would favor the long side in my video from Sunday night (video below is cued up right to that spot) and in the chat room yesterday I posted a chart that showed us that the threat of a big move lower was limited when I posted a chart of the SPY.

So how do we trade today? You do not want to chase stocks that are gapping higher. You want to look for stocks that open within one 20-day ATR of the high from Monday. That will give you that nice grind higher as the stock catches up.

The SPY is going to blow through a High- trendline and that is the last resistance before we reach the high of the year. Earnings and interest rates drive the market. Today we got great news on one of those fronts. Lower inflation is going to give the Fed room to pause. This is a major development and it will impact longer term asset allocation. That means that we are going to see more buying pressure. I am expecting that the gains will hold for an hour and we will grind higher the rest of the day. This is likely to be a gap and go. Most of the gains will be realized early so you want to focus on stocks that are on a steady move. Avoid stocks that made massive gaps up followed by long stacked green candles. Those gains have been realized. Our best scenario is a pullback into the gap with mixed overlapping candles. That gives us time to find the best longs and to confirm relative strength. If we get a pullback, I am expecting it to be fairly brief. 1OP finished flat. It is likely to spike on the open.

I would not worry too much about the market rug getting pulled out today. If you are focused on “grinders” you will not be chasing and they will have great upside. We have year end strength and a breakout through all major resistance. We also have good news on the interest rate front.

Stay in control and do not feel like this is your last chance to make money this year. We will have a strong tailwind for many weeks and there will be plenty of opportunities.