Daily Commentary: October 10, 2023

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I Like This Market Bounce… But

Posted by Peter Stolcers on October 10

The market is likely to keep doing what it has been doing. Expect lots of bid checks along the way.

PRE-OPEN MARKET COMMENTS TUESDAY – The market has been able to find support above the 200-day MA. The SPY high from August 2022 was $432. We moved above that level this summer and the market was trapped in a range until two weeks ago. The drop and bounce tested support and we are likely to move back into that range.

I am not particularly bullish or bearish. The same issues that have kept us in this range are still in play. The Fed plans to keep rates “higher for longer” and we have some Fed speak today. I am not expecting anything new. Core inflation has been stubborn and economic growth has been steady.

Earnings season will kick off this Friday. That typically keeps short sellers at bay. In two weeks, mega cap tech companies will report and that will coincide with a seasonally bullish period.

I am not expecting a big year end rally, but we could challenge the high of the year. There will still be bid checks along the way to confirm that buyers are still interested, so don’t expect a big snap-back rally. This is going to be a gradual drift higher with higher lows.

The market tends to keep doing what it has been doing. This has been the prevailing pattern this year. The economy has not fallen off of a cliff after the most aggressive tightening in decades and there are not any signs of a credit crisis. Inflation remains a concern and stock valuations are fairly rich. The Fed is close to the end of its tightening cycle. This backdrop can suit buyers and sellers on any given day and the price action is driven by the most recent headlines.

From a humanitarian standpoint, wars are horrific. From a trading standpoint, they do not have a lasting market impact.

The market finished near its high of the day yesterday and it was able to shrug off the war in Israel. 1OP will complete a bearish cycle and I would like to see SPY $431 preserved early in the day. We could see some choppy action during Fed speak. Keep it light early and wait for the bid check. If the market can hold $431 as the first bearish cycle completes, you can consider some longs. I am favoring the long side.

Support is at $430.75 (AVWAPQ) and resistance is at  the 100-day MA.

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