Thursday January 28, 2016
Key Developments :
- Big Beat in FB last night and strong oil keeps market up in tight trading range.
- Trading Range resolution #1 priority.
Today’s huge gap up was sold off quickly leaving us stuck in a 5 day trading range. It appears maybe that the market is waiting on the US GDP number tomorrow to move (no idea, I am just looking and hoping for a catalyst). The best advice I can give to you is just be aware that the news comes out at 8:30 AM EST, but don’t read it, don’t listen to it. You and I have no idea what it means for stocks, nor do we care. What is important is how the overall market reacts to the event. Do they buy it or do they sell it? So let’s take the weight of the evidence approach tonight to see why we are in a trading range.
1) Oil. Breaking out of Inverse H&S. Market has cared about this recently, so should we. Price action is #1, but situational awareness is important too. (Bullish For SPX)
Bullish Target :
2) Earnings : (Neutral = Trading Range)
Have been mixed. FB huge beat. AAPL beat, but guided lower, AMZN big miss. NFLX beat, but mkt didn’t care. GOOG is Monday. We’ll call this neutral at best. I only talk about these as these have been the key drivers to holding the market up.
3) China. Making a lower low, next real target is 2300 on this index. (Bearish)
4) Indexes are in a trading range. The resolution of that range is most important. Up or down. Inside. No trades.
Below we see SPY. We will use this tonight as the two vwap lines have merged, giving us a nice range to work with. You can see the one from the lows is acting as support and the one from the highs resistance.
I am going to trade this as a range. If we are below 187.06, I am a likely short and above 191.56, likely long. We should be aware of the channel lines as well. This rang will break at some point. Inside this range is going to be very tough sledding, so best to wait it out.
QQQ is trading below both VWAPS. YTD and from the lows.
IWM Also below both VWAPS
The Big picture still looks bleak.
The Bottom Line:
After a big move lower to start the month and a nice rally back, we are stuck in a trading range. The market is looking for some direction, but it is not sure which way it wants to go. Let it decide, don’t decide for it.