Rebound Whipsaw

On Friday, the bulls managed to put together the first consecutive up days of the prior two weeks.  It was a strong effort with a gap up and morning follow-through.  However, mid-day the market went dead for 2.5 hours before bulls stepped back in and rallied the market steadily right into the close.  During the process, the SPY, DIA and QQQ all pushed through and closed just above their 50-sma.  Of course, the IWM continues to lag and the downtrend of the last couple weeks remains intact across all major indices.

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In news over the weekend, the impeachment story continues to dominate US news and violence flaring up at Hong Kong protests dominates the International news.  On the calendar, Chair Powell speaks again Monday afternoon.  However, Inflation data (Tues. and Thur.), JOLTS (unfilled jobs – Wed.) and the release of Sept. FOMC Minutes (Wed.) may be the key economic drivers of the week.  That said, the most important event for the economy itself might be the resumption of US-China Trade talks on Thursday.  There are very few major earnings announcements this week as earnings season really kicks off next week.

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Overnight, Asian and European markets were in the green.  As of 7:30 am, U.S. futures were pointing to a lower open, back down to retest the 50sma.

Friday’s chart action gives a probability of a higher high today.  Yet, with a small gap down at the open, the bulls will have to retest the 50sma before they can rally.  So, don't get too bullish too early. Remember the bulls still have a lot of resistance levels to work through and the downtrend (which runs back to mid-September) is still the current market trend. 

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The bottom line remains to be cautious. It is very hard to swing trade the recent markets successfully until we start getting less "gaps and whiplash" and more "trend and follow-through."  So be careful chasing after one nice (or ugly) candle.  

Ed

For Your Consideration: Here are a few tickers we will be adding to our swing trade watch-list. Short- TSN, HEI, BLL Long- PHM, AIZ, DUK, ETR, PG, PEP, STX.  Trade smart, and trade your trade. Stocks we mention and talk about are not recommendations to buy or sell.

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