Summary

• Technicals look healthy, but may have hit some resistance.
• There's three obvious fundamental reasons to potentially break this market.
• But let's see if we get directional confirmation.

The market (SPY) has traded sideways for a week or so. I've been saying it's important to respect direction as a guide for trading. So, sideways isn't a great guide. Still, I think there's three fundamental reasons building that can potentially drive the next move lower.

In this video I'll tell you what I'm watching and what I need to happen. I'll also talk about how to confirm a follow through.

00:13:48

First Reason For Stock Market Break: Taper

The first reason has to do with a big Fed taper. Even though these numbers are still huge, there's still a taper going on.

They went from $60 billion a day in buying a few weeks ago, to now around $6 billion to 7 billion a day. That's way down. These are huge numbers still, but way down. I think that has the risk to soften up the market on any bad news.

Source

Second Reason For Stock Market Break: Fundamentals

Non-farm payrolls are below. They reported on May 8th.

Fed officials have been warning us all week for a key non-farm payroll number report. In tandem with the Fed taper, there's a chance stocks can actually trade weak on bad news.

Third Reason For Stock Market Break: Trump

President Trump said he plans to retaliate against China for allegedly purposely releasing the coronavirus. That has not hit the market because there's been no official move, just threats. But when we get something more official, I believe there's a good chance for a break.

Conclusion

Technicals have looked fine, but fundamental factors have been building potentially to give this market a breakdown below this sideways trend. In this video, I'll let you know what simple key indicators I'd be watching.