Market Congestion Problem is Clearing Up

After three months of moving sideways the market has finally felt an injection of activity. It is highly likely that a major move will emerge from the ashes of this week’s hard reversal that will likely last into the end of the year. At this point there are good arguments for why the move could go either way. If prices stick today and buyers come back in aggressively then we could see a breakout to the upside, which takes out old highs and puts back into play the scenario we were outlining last week. If the buyers remain timid and sellers continue to play offense taking out the 200-day averages, then we could see a turn south over the next few months that will do a lot of damage to the portfolios of long term longs. Either way, the congestion pattern is breaking up and trading volatility is returning, which can only be a good thing for our trading style.