The major indices are set to open lower in front of the three-day Memorial Day weekend as market participants focus on events in China. Beijing is imposing a new security law on Hong Kong that is likely to lead to another round of protests. In addition, China has dropped its annual economic growth target for the time ever due to the uncertainty caused by the Covid-19.
Oil and equities are trading lower on the news while bonds and precious metals are seeing inflows from investors looking for safe havens.
U.S. equities are seeing minor early pressure but there continues to be an underlying bid due to positive sentiment created by the reopening of the economy. Dozens of states are easing restrictions over the long weekend and the return to some level of normality is giving investors confidence that there will be steady improvement.
Recently, all negative news has been shrugged off as nothing more than a dip-buying opportunity. While the bears continue to focus on the historic levels of economic damage that is being done by the coronavirus crisis, the market has been remarkable sanguine. Part of this is due to the leadership of stocks that will do well in the post-pandemic economy and part of it is due to confidence that there will be trillions of stimulus thrown at any and all problems.
It has been a good market for stock picking recently and typically the Friday before a long weekend has a positive bias as speculative traders look for pockets of action. The cannabis sector has been heating up recently but there are always the 'work from home' stocks to attract attention as well.
Traders often look for some selling into the weekend when there has been a good run as is the current case, but this market is in a trading range and there is going to be some bids unless there is major surprise news.
Currently, the S&P 500 has overhead resistance at its 200-day simple moving average which is almost exactly at 3000 and it has support above its 50-day simple moving average at around 2800. The S&P 500 has had a positive bias and is sticking at the upper end of the range but there is a gap under the Monday lows that the bears will be eyeing if selling picks up.
There is always an inclination to make dramatic market predictions but right now this is a trading range action and the indices have a minor positive trend. That can change quickly but until it does the best approach is to trade and stay vigilant. The long term market direction should not be driving your decisions at this point.