Tuesday, March 8, 2011

Consolidation Period

I just wanted to do a small post on my take of the market right now. We're in a consolidation period, and have been in it for about 2 weeks. If you look at the SPY 30-min chart below, you'll see we've been holding this triangle formation for the duration of the consolidation. I expect another test of the lower trendline, and then a breakout to the upside, but anything is possible. Just keep in mind that we could also break down. However, with the US government pumping money into the market, I'm leaning towards the bullish bias.

Also, check out this chart posted by @donaldT44 on twitter. It shows the ES chart from back in November, when the market broke out of the triangle consolidation:

So for the time being, I'm playing it safe, have reduced the number of trades I enter every day and have also reduced my sizes. It's not a great swing trading environment, so just be cautious. As of today, I'm short some FAZ, VXX and long 1/3 size in SRZ, which is flagging on the daily:

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