This week we saw a continuation of the choppy markets we have seen the past few weeks. This makes trading a bit tricky as traders have become undecided in which direction prices should move. This non-deliberate trading can continue for a while so make sure you watch to see when the prices become more deliberate.
One of the most important things we need to look at when looking at price action is to be able to identify a deliberate trend. This means we will see deliberate patterns of price making higher highs and higher lows for an uptrend or lower lows and lower highs for a down trend. If we do not see this pattern, we need to be careful in that we are not forcing the trades. Take the time to exercise patience in placing your trades so you do not force them when the setup is not there.
This week we had the FOMC statement come out. This news event is one where there can be a lot of volatility so make sure you are prepared and know when these types of news events are being released. This next week we will have the Non-farm number released on Friday so make sure you are prepared for additional volatility.
In addition to knowing when the news comes out, we need to understand that this can cause volatility not only in the short term but can be the catalyst for new directional movements. If the news confirms weakness or strength, you can see a longer-term direction bias come into the markets. This can also be the thing that takes the non-deliberate price action to become more deliberate.
Today we are going to look at the daily chart of the SP-500:
The daily chart of the SP-500 continues to be in the longer-term bullish trend that we have seen for the past couple of years. Currently we are seeing the price action trade in the upper range of this trend and at a place where we would likely see the bears come in and push prices lower. While we have not seen this happen, yet we are in the upper range. Over the last few weeks, the market has developed a sideways and choppy price pattern. This type of trading has caused the markets to become less deliberate and more difficult to judge as to the direction it wants to move. In the chart above you can see the box that the price has moved in so we will want to see it move out of this range so traders can see a better trading direction.
Make sure you are using good risk management, so you are not risking too much in your trades. This should be the case regardless of the deliberate nature the market is moving in.
Have a great week!
Bill Poulos is a financial writer, president, and co-founder of Profits Run. The name Profits Run comes from a popular saying among traders, “Cut your losses and let your profits run.” The company’s mission is to encourage people to invest while reducing the possibility of risk. Poulos brings a wealth of experience and knowledge about the stock market to the company from his decades of trading. Profits Run has authored and administers many products and programs, such as Premium Income Alert, Crypto Profit Alert and 20/30 Wealth Trader. Poulos has an engineering degree, an MBA in finance, and 45 years of business experience. Bill has lived in Michigan with his wife for 50 years.