Its a Chop Fest, Don't Get Hacked to Pieces

 Here is what we have been dealing with for the past month:

SP500 30 minute Bar Chart

That is a whole lot of chop without accomplishing anything. We are perfectly flat over the past 30 days, while the market has swung from highs of 1,884 down to 1,835. These environments used to be the times when I would give back most of my gains from the prior rally. I was over-trading the range and getting caught in all the false breakouts/breakdowns. The most important thing to understand about these swinging ranges is that all the movement between the range highs and lows is noise and is to be ignored as much as possible.

A very simple way to avoid these troublesome periods is to take a longer view of the price action. Here is a weekly view of the same range:

If you zoom out a bit and look at the "forest" instead of obsessing on the "trees", you can see how by stepping back some the picture looks dramatically different. When you look at the market this way you can see how its an actual breakdown of the range that would be trouble, but within that range we are still above ALL major support.

When the market goes into these range consolidations I recommend one of two strategies:

1. Move into a large cash position and wait for a resolution of the range either higher or lower. This protects you from the emotion of watching your accounts bounce around and listening to all the worry in the media about how the market is at a top. When the range decides itself you can then reenter as you wish.

OR

2. Adopt a longer time-frame for your positions and wait for the sideways move to declare itself. 

I prefer to take the longer view and that makes dealing with choppy short-term consolidations VERY simple. If you can sit through some daily turbulence and not freak out, taking the higher time-frame plan causes no harm to your accounts, you incur no unnecessary transaction fees and can patiently wait for the next real move to prove itself.

This is a very important concept to understand and apply to your models. Choppy sideways markets should not wash out your hard earned gains. There are times in the markets where sitting on your hands is the best approach. This means no over-trading during sideways moves and not forcing positions when there isn't any reason to do so. We have had a nice run, if this range resolves to the downside and ends that run, so be it. But I will not just be giving my profits away until we have confirmation of an actual shift from this holding pattern.

A break of the range to the downside would likely trigger many failure signals as the key support at 1,835, the rally uptrend support, and 20 WMA are all tucked in just below these lows. 

Stay cool, don't over-trade, and don't obsess over every wiggle until something real occurs.