07/27/11 Market Action

All the major indexes had a major down day today. The SPY (see figure 1) has been extremely choppy on the daily time frame. I think it is going to take a few days to settle down, before I would feel comfortable with a swing trade. I will be watching to see if it can hold the 130 level. It is possible the market will remain choppy until after a resolution regarding the debt ceiling comes on August 2nd. The longer term (2 year) chart of the SPY (see figure 2) looks neutral right now. The longer term trend is still up. We had a similar choppy period between May and September of 2010. That period turned out to be a period of accumulation (rather than distribution) and the market trended nicely higher for the remainder of the year. Whether we are in a period of accumulation or distribution right now I would not be able to say with any certainty. I will be looking for clues in the price action and position myself accordingly. The primary goal of a trader is to be risk manager.

Figure 1.



Figure 2.