Nothing new to report as the broad market continues to resemble a game of ping pong while bouncing around within the multiweek trading range. The 7.22% drop from last Tuesday’s high into Thursday’s low was the largest drop in 2 months followed by yesterday’s 3% rally which was the largest daily gain in 6 weeks.

SPY daily May 19th

SPY daily May 19th

SPY continues to test the 200-day EMA from below, trading right about where it was on the first test back on April 29th. The more a resistance level is tested (and in addition to the 200ema & the 61.8% Fib you also have price resistance around 296) the more obvious it becomes to the masses. As such, should SPY pop 296 with conviction, that would likely trigger a surge of buy orders from both stop-losses on those short as well as long-side buyers stepping in on the breakout.

On the flip side, should SPY ultimately fail to clearly take out this resistance, we could see a fairly impulsive move down as longs/bulls recognize the failure to take out the resistance & shorts start to pile in. Either way (breakout or rejection), there is still plenty of resistance above & support below so the back & forth chop may continue for a while.

Translation: The broad market has not been very conducive to swing or trend trading for nearly 2-months now & while that may continue to be the case for a while (or not). Better opportunities for active trading lie in individual stocks, sectors, & commodities for the time being & I will continue to look for swing trading opportunities with clearly bullish or bearish chart patterns & favorable R/R‘s. With that being said, a sloppy & volatile sideways range in the major indices makes swing trading most other securities (individual sectors, commodities, even precious metals) more challenging than during a trending market so not a bad time to keep thing light (fewer trades) and be extra selective on taking only the most compelling trade setups until the next clear trend begins to emerge.

Trading ranges don’t last forever but the key is to recognize those ranges for what they are & adapt your trading accordingly. Trading ranges will test the patience of most traders, especially when those ranges come on the heels of a strong trend (even more so following two very strong trends, one bearish followed by a bullish trend, such as we’ve had over the past several months). Quick & unusually outsized gains are great when the market presents those opportunities but over the years I’ve learned that those periods of “easy money” are invariably followed by periods of choppy, tough-to-trade periods of consolidation. That holds true for all securities, including gold & the precious metals, various commodities, as well as individual stocks & sectors.