For all of the euphoria surrounding tomorrow's market open on yet another trade war induced gap, it should be noted that the market is accelerating right into a reinforced concrete barrier.
If the concrete barrier visualization is not enough, we have what is essentially a two day trading week coming up (nobody cares on Wednesday, market is closed on Thursday and everyone is gone on Friday) that will create liquidity gaps, making follow through a difficult endeavor.
The S&P, in particular, remains in a mind-boggling resistance range that doesn't necessarily work well with liquidity gaps, lack of follow through and general holiday induced malaise in the markets. The resistance range faced at 3,000 plus requires the full participation and attention of Wall Street in order to be appropriately dealt with.
For that reason, assuming an open to 2975 on the S&P 500 tomorrow, investors will looking to make anywhere from 25-50 points on the S&P in exchange for risk of approximately 50-75 points on the downside. A one to one risk/reward ratio at best, in other words.
While the market may be setting the stage for a dramatic theatrical performance tomorrow morning, where investors are embraced with open arms, with promises of a perpetual feast in the offing, the market remains in a generally unfriendly position until the week of the 10th.
Caveat Emptor mi hombre.
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