The range on the SPX was a mere 19 points today, lowest for the week. Bulls put in a good consolidation day and we may expect continue Volatility drops early next week if we don’t have any major news this weekend. Dow finally put together two consecutive up day, since July 7th. Sentiment continues to remain cautious even after the big run.
The double decker sandwich candle stick pattern on the daily chart this week is probably a first in history. We also have a death cross setting up on the daily where the 50ma is about to cross below the 200ma. At the same time, I can’t help but wonder if the current action is a huge bear flag or a beak out from a diamond bottom. On the news front, we still have so many major problems without any clear solutions. The sovereign debt problem in Europe is likely to continue for a while and we can swing either way after the 2 week short ban ends. Option expiration next week will likely exacerbate any move. With so many cross currents I will continue to maintain a reactive approach and look to game the extremes.
