Return To A Two-Way Market

The S&P 500 Index has traded above its 50-day moving average for over 120 consecutive sessions (!).  It’s safe to say that we’ve been in a long-only market for the past several months.  This is the way that enduring bull markets operate.  They rally in the face of EVERYTHING.

I posted earlier this week that we have a probable correction on the horizon.  The bulls haven’t given up on 1300 yet, but we’re getting some decent two-way trade in the mean time.  This is great price action for spread traders.  We’re out of earnings season with a slightly elevated vix and decent range in the S&P.

The name of the game is keeping your losers small.  If you can manage your losing trades in this market, you’re golden.  Remember, spread traders are not responsible to act as first responders in the price discovery mechanism.  Don’t trade spreads simply because they’re away from the mean, trade them as they return to the mean.

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