The markets today might have been difficult to read because the higher and lower time frames are conflicting. This can cause order flow reading/bias difficult to read, which causes diminished confidence in expectations and profit potential of trade scenarios. In today’s price action we experience a sell divergence during the morning session of trading as the NASDAQ was not able to break yesterdays high with the SPY and DJI. Which in the afternoon trading was the divergence was negated when the NASDAQ created new high and the market got some buying pressure to end the day positive (were most of this week we open higher and closed lower).

This type of uncertainty makes it tough hold longs (which are only momentum trades, lower expectation/share size) due to the macro bearish sentiment, but the shorts aren’t necessary working out either. During these times it is best to lower share size and expectation until new levels of order flow can be established and the picture is clearer in what to expect from the markets.

Looking at the daily SPYchart the bias is still bearish. We seem to be forming a range with support levels near the 104.50 area and resistance near the 111.00 levels. We also have the 20 and 200 day SMA above todays highs which is holding as short-term resistance. Until we can break the levels above it is prudence to be quick on the keys taking profit into momentum and before committing capital establish good risk/reward for trade scenarios.

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