May 7


Market Commentary for May 8, 2020


May 7, 2020

A Range Has Formed.  Trade it.

Today, we had a solid pull-back to the Support Level at 23,800.  We also saw a lot of bullishness in the last few bars of today’s market, which lends credence to the notion that we will see a solid bounce off that Support Level. 

We now have a very nice and solid trading range formed in the 15 Minute Chart from 23,800 to 24,200.  If we start up at the Open trading to the  upper level would be prudent, and then ready to sell on weakness or additional buying on a break of that level.

The Daily Chart shows the same long consolidation we have seen forming for about a month, with upper boundary at about 25,000 and lower at 23,000.  We still want to watch that lower boundary at 23,000 but the market is still acting as if it wants to rally.  Behavior at the Open will tell us which direction the emotions of the market are going to push it tomorrow.

As I have said over the past few days, economic distress will eventually push the market lower.  It has to.  Once the enormous fed stimulus runs out, an economy in trouble must eventually be reflected in stock prices.  But not yet – the current environment is quite mixed. 

Since we are sitting at intra-day Support I expect strength to come in.  If it doesn’t, watch for an ultimate breach of the 23,000 level.  It’s a Trader’s Market. Trade the swings.  Many stocks are breaking to new highs while others are falling through support levels. 

If you are trading during the session, it’s easier than ever to pick off profitable moves.  If you are investing, the way to bet is a modest part of the portfolio Long until we break 25,000.  I don’t see that happening but markets have a way of proving any of us wrong.  I wouldn’t be surprised if it does.

Ed Downs

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