Good morning and happy Friday, traders!

Volatility has returned after the holidays, but in a muted, non-directional context.  This is a little unusual as the market often would have made a strong trend move (over the course of several days) by this point after the holiday.  This week, we have had a series of economic numbers that could potentially have provided a catalyst to move the market, but even these fell flat.  For daytraders, the key to this environment is probably 1) realize that we are certainly primed for a directional, trend move, but 2) do not try to anticipate.  Assume we will stay locked in these tight ranges with no broad market followthrough, but be prepared to be mentally agile and switch modes if this changes.

In terms of sectors, we have had a mixed bag this week.  The leaders (Energy and Materials) have come in a bit, while Financials and Tech have shown relative strength.  This is perfectly normal and is typical rotation in a consolidation area like this.

Even with as little action as there has been in the broad market, there have been some great plays in individual stocks.  It is important to find stocks that are truly in play, and to be even more sensitive than usual to signs of intraday trends ending or reversing.

Watch EURUSD ($FXE) for possible followthrough today.

Gold (chart of daily futures above) have come off this week, with some good moves in some metals stocks intraday.  Note that, longer-term, this is probably not constructive for swing longs, but, in the short-term, this market has come into a large and potentially complicated support area.  Continue to watch this intraday and have a handful of “go-to” miners to pull up if the opportunity arises.

1266 is probably the line in the sand for the SP futures, with perhaps 10 points of room below that and upside to this week’s high, based on early reaction to the 8:30 number.