The fundamental news has been very market friendly the last two weeks, but the market has not been able to advance.

PRE-OPEN MARKET COMMENTS MONDAY – In the last two weeks the Fed has cut interest rates by 50 basis points and they stated that they do NOT see any signs of economic weakness. Their dual mandate is to reign in inflation while preserving employment. They feel that inflation is almost within the target range and that they have room to ease. In the FOMC press conference Powell said that they don’t want to wait for signs of economic deceleration, they want to act before they see it. This is a dovish stance, but the Asset Managers wanted to wait for the next round of economic releases for confirmation.

Last week the jobs numbers (ADP, JOLTs, Challenger, Initial Claims and the Jobs Report) confirmed that domestic economic growth was intact. ISM Services increased to 54.9. As a survey it is the most current economic data point we have and 80% of the economy is service based. That is one of the highest readings we’ve seen this year and it is well into expansion territory.

If I traded what I thought, “I would have bought the open Friday.” The news doesn’t get much better and I thought that a “Gap and Go” was likely. Instead, we waited to see if the market would provide us with a better entry point… and it did. The price action has been very tenuous and we trade what we see and not what we think.

This week, earnings season will kick off and the banks will start reporting. During the last quarter, economic growth has been good so profits should be good. The market is right where it was three months ago so valuations are a bit better than they were a quarter ago. How do I know this? Companies have another quarter of profits under their belts and in general the stocks have not gone higher. Keep in mind that valuations are still fairly high based on forward P/Es. The market bid is typically strong as we head into earnings season and that should provide support.

Why isn’t the market going up? It really doesn’t matter why. The war in the Middle East/Ukraine, the election, or possibly no more rate cuts this year. The long-term technicals are good (Cup & Handle breakout) and the short-term price action is choppy. That means we wait for market dips and we watch for support. When we have it we buy strong stocks.

This morning SPY is going to test AVWAPQ. We search for stocks that are treading water above a breakout from last week or that are moving higher and breaking out. We set alerts on stocks that had great strength last week and if they are finding support today when the market is pulling back, they have consolidated recent gains and they are ready to move higher.

From a swing standpoint, we only have starter positions for longer term swings. You could sell some out of the money bullish put spreads, but we don’t have the technicals to get more aggressive than that. There is also some room for overnight swings.

This is the mode we are currently in and it is not likely to change in the next few weeks. We have the election on November 5th and the FOMC on November 6-7. Those are two major events and we could be in a holding pattern.

Support is at AVWAPQ and resistance is at the all-time high. I do believe we have a chance to challenge the all-time high this week even with the pullback this morning.