Trading Range Showing Signs of Wearing Thin

Stocks had a great week so far. However, it is interesting to note that 100% of the gain was before the market even opened on Monday. Since Monday’s open, the Dow and S&P 500 are right around the flat line. Most of the major indices have been coiling up for a bigger move. Usually, that move is in the same direction as the current trend, which would be higher in this case.

However, as you can see in the hourly chart of the S&P 500 ETF below, it’s a little sloppy while it oscillates around the horizontal blue line. That line has essentially acted as a ceiling for over a month.

As you know, my thesis has been that stocks are in a trading range, except for the NASDAQ 100, and that range will continue until proven otherwise. I also have been cautious that we could see a move above or below the range that fakes people out and then quickly reverses to the other end of the range.

To me, stocks look a little tired. Options traders are a little giddy. Participation in the rally has weakened in the very short-term. If the bulls can hold on for another week or so without any damage, I will have to reassess and look at an upside breakout sooner than I thought. However, if the bears make some noise, we could very well see the first real pullback since the March 23rd bottom. Regardless, I do believe that there will be a tradeable decline before Q2 ends.

Have a safe and sane long holiday weekend!

I am so looking forward to three days without the market being open.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
If you have at least $250,000 of investable assets and would like to schedule a complimentary meeting, call, or video conference with me, please click on my calendar here email me at or call the office directly at 203.389.3553.

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