By Andrew Nyquist
So the saying goes, “the tension on the tape” is thick. Evidence of this lies in the aforementioned multi-week pennant formation on the S&P 500. This formation illustrates the extent to which the Bulls and Bears are jockeying for position. The sheer size and scope of this formation is sending a message to market participants that the next move should be both sizeable and volatile.
My advice to traders and active investors would be to play small and quick. I would also be on the lookout for a “fakeout” — the thicker the tension, the greater the odds of a quick misdirection move. For instance, a quick move out of the pennant formation in either way that quickly reverses back through the pennant in the opposite direction.
However, a sustained break higher would entertain a run over 1300 on the S&P 500 into year end, while a break lower may signal a sharp pullback and retest of the lows.
You can learn a lot from watching.
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No positions in any of the securities mentioned at time of publication.
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