S&P 500: Sometimes Trading Requires Patience

Hurry Up & Wait

Good morning traders.

I have received several questions regarding the current state of the S&P’s.

The funny answer would be ‘insanely out of touch with reality’ but sadly we cannot make a living with emotional one-liners.

The fact is, the trend remains up and my best guess at this stage is that we are in the midst of a correction.

Corrections can unfold in a myriad of ways and they always frustrate traders who are looking to time the end of them. If you recognize that you are in a correction, that is half the battle since you do not have to fight price action.

The fact that we did not break higher in recent days was the EXACT reason we closed the SPY Call Spread. The longer prices chop around in a sideways manner the more the value of the spread decays away.

Here is my current take:

  • Trend is up
  • Prices are in the midst of a correction
  • Testing broken trend-channel support (see chart)
  • Above 2367-2375 suggests the boring grind higher has resumed
  • Below 2327 raises a warning flag for further weakness

When I look at the 4-hour chart it becomes even more clear that any resolution to the upside (or downside) remains unclear.

This is why I like Elliott Wave Analysis. Being able or not able to count of 5-wave and 3-wave patterns provides insights of where prices are likely heading.

For now, the count and structure of the price action offers no clear edge.

Remember, it is OK to not be able to draw a clear conclusion. There are not trades everyday….good ones at least.

Dave

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