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Dovish FOMC Minutes Expected - Market Near Resistance - Upside Limited

Posted by Pete Stolcers on August 21

Posted 9:30 AM ET – Yesterday we saw little profit-taking and the S&P 500 is resting near its 100-day moving average. The overnight news is very light and this morning we are bouncing off of that support level.

We are in a news vacuum and traders will latch onto anything they can find. All eyes are fixed on the FOMC minutes this afternoon. Dovish tones are expected and stocks are moving higher in advance of the release. “Fed speak” in Jackson Hole Thursday and Friday might spark a little action.

Tomorrow flash PMI’s will be posted. Europe has been particularly weak. Germany is proposing a $50 billion stimulus plan and that will help to soften the blow.

Trade negotiators feel they are close to a deal with Japan. Trump needs a win to settle trade war concerns.

DC is in recess, earnings season has ended, the economic calendar is light and traders are taking time off. Volume has been light.

All of the crosscurrents I’ve been outlining the last few weeks are still intact. The market wants to rest near the 100-day moving average and I believe we will compress around that level the next few weeks. Support is at SPY $282 and resistance is at $294.

Swing traders should be in cash. If we get a spike to the upper end of the range I might consider a short position – otherwise we will stay sidelined.

Day traders should look for an early shorting opportunity. I don’t see any news to justify the rally and gaps higher tend to be faded. The trading activity will decrease after two hours of trading and we will be dead till the Fed minutes.

Look for choppy trading and smaller ranges relative to what we’ve seen the last few weeks. The S&P 500 will start to compress around the 100-day MA the rest of August.
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