August 19, 2017

Short-Term High-Probability, Mean-Reversion Strategy – SPY Continues to Trade in a Tight Range Bound Fashion

Another day in the range.

The S&P 500 (NYSE: SPY) continues to trade in a tight sideways, range bound fashion – seven days to be exact.

Since the gap higher  on 3/30 , SPY has vacillated between $132.36 to $1340.00.

Typically, when the broad market ETF trades in this tight of a range, we will see SPY spike out of the range in a violent way. I expect to see much of the same this time around.

Basically, the tighter and longer the congestion, the larger the move.

If the bears do take the reigns they will first have to overcome the $131.90 of the first gap. If SPY continues to move through that level I would expect to see SPY move back to close the second upside gap that was established back on 12/1 at $118.03.

Remember the summer doldrums are right around the corner. Remember, Sell in May and go away?

I will be back tomorrow with a thorough discussion on the summer “phenomena”

Stay tuned!

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 4/07/11