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News Vacuum - Look For Tight Ranges and Light Volume

Posted by Pete Stolcers on May 21

Posted 9:30 AM ET – Yesterday the market tested horizontal support at SPY $285. We closed slightly below that level and this morning we will trade above it. The news is fairly light this week and trading volume will decline into the holiday.

US/China trade negotiations will resume next week, but neither side seems motivated. The rhetoric has turned nasty and both countries imposed new tariffs. Trade restrictions against Huawei eased overnight and the US will grant the company 90 days to find non-US suppliers. This has sparked a small rally this morning. I am predicting that there will not be a trade deal before the 2020 presidential election. Trump and Xi will meet at the G20 meeting on June 28th.

The FOMC minutes will be released tomorrow afternoon. I’m expecting a dovish tone and this should be a non-event.

Eurozone flash PMI’s will be released Thursday. Economic conditions have recently ticked higher, but the results will still be dismal.

Earnings season is winding down and stocks are trading at the upper end of their valuation range.

Swing traders should remain in cash. The G20 meeting between Trump and Xi should keep the relations from deteriorating completely. Stocks will drift lower and the SPY is likely to test the 200-day MA in the next few weeks. During that time we will have new economic data points to evaluate. You know from my comments that a global economic slowdown is a greater threat to the market than a trade war with China. If global activity is stable we will look for a buying opportunity when the major moving averages are tested. Until then, the downside risk is greater than the upside reward.

Day traders should look for the range to be established in the first hour. The news is light and the market lacks a “driver”. Fade the extremes.

I am expecting a fairly quiet week and tight trading ranges. The volume will decline as the weekend approaches.

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