9 Minute Read

Tackle Today: Are We Heading for Consolidation?

February 15, 2024

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«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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