Update on Tight Trading Range on SPY Dec 21

Dec 21, 2009: 11:02 AM CST

“The more things change, the more things stay the same…” or so it seems since mid-November to mid-December in the SPY and S&P 500 and broader US Equity Market.

Let’s take a ‘pure price’ look at the current trading range as seen on the 60-min chart.

The “boundary lines” or horizontal trendlines exist at the $111.50 area for resistance (with ‘bull traps’ up to the $112.00 level) and $109.00 level as support.

The market has been finding support/resistance, as well as gapping through, the $110.40 level as seen in the chart above.

This range period shows why it is absolutely critical to understand current market “character” or behavior (repetitive patterns or tendencies) instead of relying solely on indicators.

Here is an updated chart of the actual S&P 500 Index for reference:

I’ve been highlighting this concept repeatedly and navigating targets each evening to subscribers of the “Idealized Trades” service – hoping to add a bit of clarity to this recent trading range.

By assessing market character, you can filter out those indicators or techniques that do not work in certain environments (such as moving averages in range environments) and focus your trading tactics, targets, and stop-losses on those that do in range periods (trendlines, sometimes overbought/oversold oscillators).

The market will break out of this range and will likely embark on a ‘trend’ or impulse move, as forecast by the “Price Expansion/Contraction” principle, but until that happens (which sets up a trade strategy to play the breakout), the range remains dominant until proven otherwise.

To see a few prior posts on the trading range, reference the following:

“A ‘Pure Price’ Look at the Recent SPY Trading Range”

“Eerie Similarities in Recent SPY Trading Range”

“Critical Levels to Watch in SP500, NASDAQ, and Dow Jones”

“Could SP500 be Building Another Power Move?”

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

6 Comments

6 Responses to “Update on Tight Trading Range on SPY Dec 21”

  1. blues Says:

    But SPY is no longer accurate, no? Because of the pay out on Friday, it really mess up the range… on SPX, we are really close to the breaking out point already…

  2. Corey Rosenbloom, CMT Says:

    Blues,

    Good point – I noticed that when viewing the difference in TradeStation and StockCharts. Depending on how the software reports the dividend, the charts will be slightly off. Just need to redraw the range values on SPY as needed depending on your software program.

  3. Corey Rosenbloom, CMT Says:

    I went ahead and posted an updated SPX chart for comparison.

  4. pipercolt Says:

    when you figure which way its going to go let me know.

  5. tgarfield Says:

    Corey I asked you about B wave higher last week. IT was in regards to this. Does this make any sense?
    http://www.kitco.com/ind/rosen/dec212009.html

  6. tgarfield Says:

    Corey I asked you about B wave higher last week. IT was in regards to this. Does this make any sense?
    http://www.kitco.com/ind/rosen/dec212009.html