Tackle Today: Are We Heading for Consolidation?
February 15, 2024
«Look for Rotation if We Do»
Coach Mark here.
Markets have stabilized in the last couple of days after the CPI induced volatility day on Tuesday. I have been wondering this morning if we are heading towards a period of consolidation. A weird thought after what feels like endless trending market over the last 9-10 months
We ramped up last summer only to selloff last fall only to have a historic rally over the last several months. It has been all momentum one way or another for a long time now! It almost feels like we are due for a little consolidation.
Consolidation might feel like a strange thought but it is not an anomaly from a historic perspective. In fact, I conducted a study recently examining conditions where the S&P 500 is overbought on the weekly chart and the base case is some version of consolidation to follow those conditions.
A consolidation period makes sense in the current environment. Bulls are in charge of the narratives and trends but to balance that valuation is in the higher range, there is a little doubt on recent CPI readings, and positioning and greed are a little frothy. In fact, some version of consolidation makes a lot of sense.
We will see how it plays out but a little period of consolidation would be wonderful for theta-oriented traders like myself and for directional traders could provide a lot of short-term opportunities as the market rotates from one area to the next.
Have a fantastic Theta-Thursday!
Chart of the Day: S&P 500 Daily Chart
Consolidation periods are hard to call but a man can dream on a Theta Thursday! The SPY will need resistance to hold for that dream to come alive.
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