Much Needed R&R

The market is well into its second straight day of consolidation after an impressive run up over the past few weeks. In the short term, many charts became overextended and needed some backing and filling, at a minimum. I am still going to let this market prove itself to me first, before I start chasing momentum to the upside.

One thing to note is that just because we are consolidating in time, and not so much in price, that does not necessarily make it bullish per se. As an example, take a look at the daily $SPY chart that I have included below. Note how in mid to late June we had a string of dojis as well. Despite giving off the appearance of a bullish consolidation, we rolled over in swift fashion.

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This is why cash continues to be such a powerful position in this kind of market environment. No one knows for sure whether we are still in that range bound channel, or whether we have surely broken out to a new trend higher. However, one thing is for sure: Getting caught aggressively leaning the wrong way in the face of the next big directional move is going to be destructive to your capital.