Good morning traders,

Very little has changed this morning–I could pretty much cut and paste my comments from previous days. The market is locked in a higher timeframe consolidation, and there are two key elements short term traders must keep in mind: 1) in this type of pattern low volume, choppy trading predominates and 2) breakouts from these areas tend to be fake breakouts that are quickly reversed. (Note that these two points are actually both an expression of the characteristic price action of consolidation.) We have been watching a trend channel line this week that has provided a good reference, but I would not make trades off of a line that has been penetrated so many times.  From a practical standpoint, the trade I would be interested in making is this:  the market trades sharply away from the line and then comes back and holds cleanly.  The key here is first the emergence of a sharp impulse move that shows a change of character, and, so far, we have not seen that.

World markets are mixed this morning, with a generally negative tone.  Portugal, Taiwan, South Korea and Russia are all down on fairly significant moves.

In currencies, North American currencies are a little stronger overnight (CAD and USD), with the US Dollar index up 0.4%.

Nothing at all to note in early trading for commodities.  Precious metals up slightly, Oil up, Natty down, Softs (ex Coffee) up slightly and Chicago Grains flat.  Very little information here.

This day looks like more of the same.  If you are trading broad index products you need to contain your expectations and focus on what are, essentially, scalp plays.  A breakout (whether up or down) is probably a process that could span several days so you do not need to be in the first move.  The first move will be volatile, with little liquidity on either side, and prone to false breaks, so this could be a painful trade to focus on.  Also, there is no evidence to suggest that the breakout really is overdue.  This kind of flat market environment can persist longer than anyone expects, and, bigger picture, the market’s ability to consolidate at these high levels probably speaks volumes about the conviction level of the bulls.  Focus on in play stocks and sectors today rather than indexes.

Good trading