Let’s take a quick look at the intraday structure developing currently on Friday’s morning trading for clues to a possible range expansion move yet to come.

S&P 500 15-min chart:

I’ve been saying something is ‘off’ or ‘unhinged’ this week and now perhaps I have a better picture to explain that.  As of 10:30am EST on Friday’s trading, the price action since Tuesday’s close has been completely within the range of Tuesday’s high and low, which is a very odd development that underscores market uncertainty, lack of direction, and range compression.

Look at January 20th 45 point range from 850 to 805 and notice that each day’s high and low since then to present has been ‘trapped’ within that range.  It’s quite odd for price to go this long trapped inside one candle (or bar) on the daily chart and it’s a signal of directional uncertainty… or more accurately, it represents balance (or ‘value’) between buyers and sellers.

Also, we’re forming some sort of triangle or consolidation pattern.  I’ve drawn two trendlines to show the compression – one of which is more ‘classical’ which connects spike highs and lows and the other trendline runs through meaningful closes, cutting off the spikes (wicks).  Either way, we are consolidating into a narrow range.

Keep watching these zones between 810 and 835 for any price breakout which could lead to an expansion move up or down… more likely down but it’s best to wait for a break than to try to chance it sometimes (at least from a risk-reward standpoint).

Be prepared for a fast  moving market to break soon – it might not be Friday – but after a price consolidation move as we’re having now, price tends to break into an expansion move.  Take advantage of that if it comes.

Corey Rosenbloom
Afraid to Trade.com

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