Why I Think The Market Is Poised To Make A Big Move And Two Ways To Play It
On Wednesday, the Nasdaq traded back and forth in a fairly
narrow range–in spite of a Fed announcement.Â
Ditto for the Ps. Â
Volatility (i.e. price movement) runs in cycles. Normally,
periods of low volatility tend to be followed by periods of high volatility.
Considering this, notice above that the indices have moved very little over the
past few days. This “compression” in volatility suggests that we are
due for an expansion of range (i.e. a large price movement).
The problem with volatility analysis is that you never know
which way the market will move as volatility reverts back to its mean. Here’s my
guess: since the market remains overbought and due to correct and since I have
some market timing systems triggering, I think the initial move will be
to the downside. After this correction, my feeling is that the market
will be free to make another leg higher. But hey, that’s just my opinion, I
could be wrong. Â
So what do we do? If you’re nimble and
aggressive, look to play the correction in the index shares but only on signs of
weakness (i.e. wait for an entry or trigger). For everyone else, wait for the
market to correct and then look to get long if (and only if!) the uptrend
resumes.
No setups tonight. We should could see a plethora of setups
as soon as the market has a meaningful pullback.Â
Best of luck with your trading on Thursday!Â
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.
Â