SPY June 11 2013

SPY June 11 2013

There are times when it is dangerous to try and out-think the market. If you control hundreds of millions of dollars and can actually affect the market, that's one thing. If, however, you are just a small fish who is carried by the tide, it is best to wait until those with the deep pockets tip their hands.

The current long-term uptrend is innocent until proven guilty. Anyone actually playing for a reversal may get lucky, but that is not a prudent way to play the odds. We remain in the middle of the Sainted uptrend channel that began last year. Lord knows what happens when that gets breached forcefully to the downside. But it hasn't happened, and probably won't for a while, so long as QE remains in place.

So, we are stuck in a range. It can be defined as 1600-1685, but realistically it is much smaller than that. Any extended break below 1620 at this point almost certainly means another trip to 1600, which probably won't hold a second time (if it does, hold on to your hat for the rocket ride back up to 1640). Even shorts are getting wise to this game, and they aren't actually philanthropists who want to finance repeated rinses and surges for the benefit of longs.

On the other hand, any break above 1650 would be telling. It might not lead immediately to new highs, but it would be a pretty good indication that such new highs await.

Trying to read anything of deep significance into the vicious intraday swings we've seen recently is futile and counterproductive. The market goes down ten points and the Bears think they've finally been proven right, the market goes up ten points and Bulls start loading up. Both wind up getting creamed. In a sideways market, you buy the dips and sell the rips, that's just how the experienced players do it until it no longer works. Also, if you really want to blow your trading account, try to play every little swing up and down. It will work a few times, then suddenly it won't ("Hey, it hasn't been doing that!) and you will get whip-sawed just like they want.

Daytrades and scalps for this trader for the time being, until the big fish tip their hands with a break in one of those directions. Expect a major head-fake, just when one side thinks it's been proven right, the boom will fall in the other direction and really take off without looking back.

All that said, with all the volatility we're seeing, daytrading actually is a great way to make coin right now if you recognize the chart patterns and exercise discipline. You'll likely see your price at some point sooner rather than later with all the contrary swings. That is why some of us actually prefer static markets over trending ones. But with this market, best to play in the direction you think the market will wind up going ultimately. Playing both sides is cool and all everyone says you "have to be able to do that to be successful," but it also will tend to mess you up in a see-saw market. Wait for good set-ups in your direction, they happen every day if you are patient.