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Day Traders Lean On This Search Variable Today - No Market Tailwind - Speed Bump Looming

Posted by Pete Stolcers on November 27

Posted 9:30 AM ET – PRE-OPEN MARKET COMMENTS WEDNESDAY – The market continues to float higher on light holiday volume. Until president Trump signs the bill supporting pro-democracy protesters in Hong Kong the rally will continue. Traders view his reluctance to sign the bill as “market friendly”. It demonstrates that he wants a trade truce with China and that he doesn’t want to muddy the water. Look for very quiet trading today with an upward bias.

If Trump signs the bill, China has promised to retaliate and the trade truce could be in jeopardy. They need this agreement more than we do. Overnight we learned that industrial profits in China declined 9.9% in October (year-over-year). Their CPI jumped 3.8% last month because of the boycott of US agricultural products. China is imposing tougher penalties on intellectual property theft and this is a gesture of good faith. It appears they want a truce as well.

The USMCA is much more important to our economic activity and Democrats say they are close to a deal.

This morning the second reading for Q3 GDP came in at 2.1% and that was better than expected. Durable goods orders rose .6% and that was also better-than-expected.

Swing traders should hang onto the VXX position. Option implied volatilities are extremely low and we are due for an “ugly day”. Place a limit order to sell at $20. Keep your credit spreads to a minimum. The risk/reward profile is poor and traders are forced to sell spreads too close to the money to generate a decent credit. I am selectively short spreads and I have been outlining the technical patterns that I’m looking for this week. Focus on the three stocks I highlighted in last night’s Swing Trading Video. You should largely be in cash waiting for the dip. At a forward P/E of 17.5 I don’t believe we are going to see a market melt up.

Day traders need to find early opportunities. The market won’t provide a headwind or a tailwind today. Focus on stocks with heavy volume that are breaking out and try to catch some of that momentum. Heavy Buying, Relative Strength 30 and PopBull are the Option Stalker searches I will be using on the open.

The action will be extremely light today and Friday is a half day. Take time off and enjoy time with your family. I will not be posting market comments Friday.

Wishing you and your family a Happy Thanksgiving!
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