The S&P Is Due for a Directional Breakout

As the holiday weekend
approaches, volume wanes and price action drifts.
“Never short a dull
market” is an adage I’ve seen hold true far more often than not. Weak market
action on weak volume almost always winds up sideways to higher by session’s
end. With a defined uptrend in place, any weakness in price this week is likely
to hold support as well.

S&P 500 has been perfectly sideways inside
paltry-range sessions the past four days. It is due for a directional breakout
soon, which could happen this week. More likely to stay in a muted range and
move big early next week, but can’t rule out a strong upside push. Holiday
periods here have seasonal strength, and that is fundamental for a reason.

Russell 2000 futures have swung thru more
intraday range than ES by comparison as usual, but remain sideways, too. Volume
this week has been a fraction of +/- 200,000 contracts clearing recently. We
might not see that type of volume printed until next week or beyond, but doesn’t
preclude a directional surge on lower volume before then.


We have roughly six trading weeks left in 2006
and this year is in the books. With stock markets pressing multi-year and/or
all-time highs, fund managers are in full press mode to keep pace. There are
zero thoughts of selling anything on a sustained basis right now, and that
market mentality won’t change unless some outside catalyst shocks the markets
lower. Given the status quo, price action continues sideways to higher thru
year’s end.

Volume and volatility have dried, likely to
continue the ebb until next year as well. We have entered a period in time where
markets traditionally ease thru the finish line higher or at par with current
levels. “Overbought”, “extended” and “too high” are all human projections to
label price behavior they simply do not understand. Markets go up & down over
the course of time. There are some periods where price action just goes up or
just goes down. We are in one of those right now… for better or worse.

Day traders live on volatility, and that is a
fleeting commodity here with VIX levels buried in (unthinkable) single-digit
readings. It is what it is, and quiet times are what we have to work with now
thru the visible future ahead.

Trade To Win

Austin P

Austin Passamonte is a full-time professional trader who specializes in E-mini stock index futures, equity
options and commodity markets. Mr. Passamonte’s trading approach uses proprietary chart patterns found on an
intraday basis. Austin trades privately in the Finger Lakes region of New York.