Now its official. I can't see anything out my window! Its snowing here and watching it come down is passing the time as the volatility of the market has been making me dizzy. Or am I dizzy because of my night out with Toddo and Mr. Succo?? Must be the volatility!
I also think something else is official. No one has any conviction on where we are headed! If the S&P were able to close in this range one would think that a big move is coming soon just by looking at the technicals. It seems that if we are able to trade through 1070 or down below 1063 on any serious follow through the market would certainly travel that way for a few days. I don't think it takes a genius to figure that one that! The questions that remain are: when is this move going to happen and which direction will it be?
If you remember we had a similar situation to this in the S&P on November 17-24. We were stuck in a range (1034-1048) with no idea of where we were going to go. My approach was to flatten out all positions that I did not have 100% conviction in and let the market tell me what to do (then position after the breakout or breakdown). If you look at a chart of the S&P we can see that breakout above 1048 lead us straight to 1075. We appear to be in the same situation and I am using the same strategy. By doing this we can be more objective in terms of what the market is going to do.
Positions often cloud our vision (for good reason) and it makes it difficult to see things clearly in the market. I can't tell you how many times I speak to people and you can hear "position breath" in their voice. I am guilty of this too on occasion. We all are. This is what happens when a stock is at a pivotal point and instead of being objective (which may or may not support your position) you rationalize your position in terms of whether you are long or short.
In my opinion this current market environment is a good time to look at things as objectively as you can. If you have to trim down so be it. Why struggle with the day-to-day grind while the market figures out which way to go? Instead I try to position myself for both scenarios (breakdown or breakout.) This way if the market is able to pierce through the overhang at 1070 and close strongly, I have an idea of what to buy or sell. And vice-versa for a trade below 1063. Have a great weekend and let's all hope for a tradable trend next week!
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