In the last few months the market had a bullish news cycle and that has ended.

PRE-OPEN MARKET COMMENTS WEDNESDAY – In the last few months the market has benefited from decent economic news, trade deals, the Big Beautiful Bill and strong earnings. Those upside catalysts are gone, but one remains. Will the Fed cut rates in September and is that bullish?

Let’s tackle these bullish news sources one-by-one. The decent economic releases have actually been slipping. Everyone was expecting a disaster related to the trade wars so they have been better than feared. The jobs report last week showed that employment for May, June and July was only 19K, 14K and 73K respectively. Almost 260K jobs were removed from the initial estimates the two previous months. These numbers are weak! ISM Manufacturing and ISM Services were also weak. The services sector accounts for 80% of our economic activity and it almost dropped into contraction territory. GDP was a robust 3%, but much of that had to due with an improvement in trade balance that resulted from tariff front running.

Massive trade deals were pending this summer and they have been announced. In general, tariffs are going to increase substantially and the revised numbers are still fairly close to the original levels that were proposed in April. Trump is still wielding this sword and countries (i.e. India and China) that buy oil from Russia or Iran could see a huge increase in tariffs this week. The tariffs could change at any time and Trump is using them for leverage.

The Big Beautiful Bill is going to be stimulative, but it will take time for those policies to bear economic fruit.

Earnings season has featured many beats, but analysts have substantially lowered estimates in the last 3 months by almost half. Mega cap tech giants have posted results, but the market has not been able to advance. AMD, SNAP and SMCI were down after reporting last night and they will weigh on the market today. Valuations are high by historical standards and stocks will do well just to tread water.

Buyers are still engaged because they believe a Fed rate cut in September is likely. Be careful what you wish for. If the Fed cuts rates it is because they see economic weakness ahead. Central banks around the globe have been cutting interest rates to fend off economic deceleration and easing has not turned that around. Typically, the first rate cut or two are “well received”, but as the bad news starts to mount, the mood sours quickly.

I’ve been cautious the last few months and I have not participated in this market rally to the extent that I should have. The cracks in the dam are there and I am not going to ignore them. I am sticking with very short term trades and I see opportunity on both sides of the market at current levels. August and September are seasonally weak and I am expecting a pullback. I won’t swing trade from the short side until I have technical confirmation and AVWAPQ is the first level that needs to be breached with ease.

Traders are taking time off and the volume will dry up. That means most of the price movement is generated by trading programs. They search and probe for size and as soon as they find support/resistance the market reverses. This makes trading very challenging. You have to wait for your windows to set up. Enter well and when the move runs its course, take gains. This is very much a hit and run market. The exception would be a material news event that hits the market where we see steady directional movement. There’s nothing on the calendar until Jackson Hole (August 21-23).

It doesn’t matter which side you trade. If a stock has a big breakdown or breakout on heavy volume, you have your candidate. Watch for RS/RW and wait for the market to line up. This is how we always trade, but it is critically important to stay on track now. This is a time when you can piss your capital away. Moves that look legitimate quickly reverse. If you stay patient, you can make money.

We need a market pullback to shake things up. Without it, we are trapped in these compressed intraday ranges and we are forced to time wiggles and jiggles.

Yesterday’s range is support and resistance. If we breakout of it early in the day we have a chance for movement. The longer we stay in it, the greater the odds are for an inside day. There was not much movement overnight in international markets.