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| Figure 1. SPY |
The market continues to be choppy and range bound between 123 and 112. This type of market environment is not offering low risk swing trade setups. My personal opinion is that the market will eventually break to the downside. This does not seem like a healthy market. The market is very headline driven right now. The market has also become too dependent on the Fed. It looks like operation Twist did not offer the kind of liquidity seen in QE1 and QE2. Cash is probably the best position for most people and that has been the case for the past two months.
I am primarily a technical trader, but it help to have a good idea about the big picture regarding the economy. I have heard some comparisons with regards to what the Fed has been doing to the 1930's depression. The thinking is that if the Fed has properly inflated the money supply the depression could have been prevented, or at least not as severe. I think there is more to the cause of the depression than the Fed failed to add enough liquidity. I highly recommend The Forgotten Man, by Amity Shlaes, for those that are interested in learning more about this period in American History. It is an in-depth look at the economic struggle during the Great Depression. The book also goes into great detail about Presidents Coolidge, Hoover, and FDR.
