Earlier in the week, we spoke about the nightmare of a sideways market for traders. Nothing is worse in trading than being in a position when the market is only giving you little moves back and forth with no follow through. Thats exactly where we are at now.
While we may still be in the middle of a bull rally, prices have taken a break. For now, we are chopping back and forth before making another move higher… or lower.
If you zoom out to the daily timeframe on SPY or SPX you will see that we are getting toward a supply zone, or a reject area. Historically, when we have gotten to this area in the past, traders and investors were treated to a sharp sell off.
This is not exactly the place to jump into the market with both feet. The risk to reward would be to the downside, history would show. However, this market is anything by predictable and a move higher could just as likely be in the cards.
That is why we stress patience as we wait for more volatility to enter the market and give us directional trend, one way or the other. Now is the time to practice patience and self-control as we wait for opportunities to present themselves. Do not blow up you account because you ignored your risk management and are trying to predict where the market is headed. Cash is a position.
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