We’ve all experienced times of impatience and anxiety when over the course of several days or weeks a deadline for action looms. A decision has to be made for a particular project or possibly a life changing event, if for no other reason than to save our sanity.
The same happens in the stock market. Emotions among traders and investors create supply and demand, moving the markets in one direction or the other depending on the sentiment of the majority. Then comes the time when no clear direction has been established and thus a decision has to be made and made soon. The question then becomes: who is going to make the first move?
NOW IS THAT TIME!
Let’s look at one chart, the S&P 500 which, by the way, has not put together two consecutive up days since the first two trading days of MAY(along with the DOW)!
PRESSURE BUILDING POINT OF INTEREST:
1. The 200 TANK resistance and the 50 TANK support is moving closer together along with the upper and lower bollinger bands. 21 TANKS are sitting right in the middle with no clear sign of support or resistance as of this writing.
2. There is a wide channel (red parallel lines) that has been created from the highs reached on January 6 and May 8 (top red line) and the support lows established on April 17 and May 1 (lower red line).
3. A tighter channel has been formed within the wider channel over the last several days. See the dotted line.
4. The indicators I use are all neutral with no clear signal (at this time).
WHAT IS GOING TO HAPPEN NEXT?
The market is going to do one of two things and we should be prepared for either scenario.
A MISSILE LAUNCH: the market is going to break out of the tight and wide channel and push through the 200 TANKS for a new leg up.
BUNKER BUILDING: the market is going to start digging another hole (in this case a bunker) as it breaks down through the two channels and heads to-and possibly through-the 50 TANKS.
I refer to this market condition as NARROW PASSES and believe the best course of action is inaction until there is a move in one direction or the other. Small intraday trading for quick profits may be another alternative.
Make sure you are ready to enter the battlefield because the next move could be a big one!
“We know what happens to people who stay in the middle of the road. They get run over.” Aneurin Bevan
“Nothing is more difficult, and therefore more precious, than to be able to decide.” Napoleon Bonaparte
