The market has formed a sideways consolidation in recent weeks as it rallies one day and sells off the next. Intraday movements have been sizable, shaking those trying to pick a direction. As fewer traders get involved the price range narrows and becomes compressed. Eventually there will be a breakout in a direction on heavy volume and with any luck it will start a new trend. Options trading investors should take note.

I have been sitting on the sidelines for a few weeks giving this market some time to sort it all out. Some times it’s best to just stand aside.

It is very important to note that each trader sees the market in a different way and once it is aligned with what you are comfortable with trading, only then should you step in and trade. If not, then it’s best to wait for more favorable price action.

SPDR S&P 500 Trust

Gold has been trading sideways for almost two weeks now as it tries to break free of the December high. It is much in line with the SPDR S&P 500 (NYSE: SPY) chart above. I feel Friday or early next week that the market, dollar, metals and oil will make some sizable moves either up or down.

Gold Futures

Conclusion

In short, I don’t think it is wise to jump the gun and take on any large positions until we see what happens on Friday overseas. If nothing happens which is kind of what I am thinking, we should see the extra fear value come back out of the price of gold, silver and oil (drop in price) and possibly help boost equity prices.

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