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Impeachment Not An Issue For the Market - But This Is

Posted by Pete Stolcers on September 25

Posted 9:30 AM ET – Yesterday the market dropped below a minor horizontal support level and it looks poised to fill the gap from two weeks ago. Many analysts claim the impeachment hearings sparked profit-taking, but I disagree. This is simply an effort by Democrats to tarnish Trump ahead of the 2020 elections and it won’t go anywhere. The market is addicted to easy money and it will not get another “fix” this year. This decline is a delayed reaction to the FOMC statement last week.

Most Fed officials don’t believe that another rate cut will be needed this year and the market is pricing one in. Without this safety net there is room for profit-taking when stocks are trading at the upper end of their valuation range.

US/China trade relations are improving slightly. A face-to-face meeting in October has been confirmed and China is increasing its pork purchases. Both countries will try to keep investors calm knowing that a deal will not be reached before the 2020 election.

The flash PMI’s out of Europe were extremely weak. Germany is likely to post its second consecutive quarter of negative growth and that would officially put it into a recession.

Domestic economic conditions remain strong. Retail sales, ISM services and ADP were much better than expected two weeks ago.

A hard exit for England seems very unlikely in October and that dark cloud has parted.

Earnings season will begin in two weeks and pre-announcement warnings have been minimal. At a forward P/E of 17, good news is priced in. Technology stocks have taken a beating in the last week and I’m seeing some buying opportunities.

Swing traders need to be patient. We are getting the pullback we were hoping for and I am ready to pull the trigger. First we want to see SPY $294 tested. That would fill the gap and it would confirm support at the breakout. In another week we should have that confirmation and the bid should start to strengthen into earnings season. We will be looking for stocks with relative strength using Option Stalker searches and I will post my weekly swing trading video in the platform tonight.

Day traders should look for follow-through selling this morning. Global markets were soft and I don’t believe we will see a meaningful rally until the bid has been tested. SPY $294 is in striking distance of that level and I hope we test it today. If we bounce off of that $294 I will be trading from the long side. Watch my morning day trading video on my YouTube channel (OneOption) the rest of the year.

The news is light and that favors the momentum today. I’m grateful that we had some movement yesterday and the activity today should be good. You can increase your trading size and activity.
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