Splash Zone Weekly Wrap Up: 3/14/16

March, in my opinion, though utterly bullish, will go down as a challenging month for active traders and in particular, successful ones that seek to to minimize risk and maximize gain.

The reason for it is that, in this month alone, SPX is up 90 points or 4.6%. A huge move, no doubt. Of those 90 points, all but 10 of them all come in just two trading sessions – March 1st and March 11th. Everything else has been sideways or choppy. 89% of the price action is contained within two trading candles. 

The rally comes on the heals of conditions that are extremely overbought and each of the two rallies came on previous days that warranted caution. The two day pullback and head fake prior to 3/1 and then the large, in insanely crazy session on 3/10 that formed a massive doji pattern on SPY. 

Like I’ve said before and will continue to say, is that our success shouldn’t be judged as traders on whether we manage to catch every single move that the market sends our way, because frankly that will never be the case. First our priority should be to manage the risk on each individual trade (bet you’ve never heard me say that one before!) followed by remaining consistently profitable in our trading throughout the weeks and months. If you do that, it won’t matter how many moves you catch, but what will come about is that your portfolio’s profits will consistently increase over time. 

Heading into the new week, yes, we are slightly long, but like any good trend, eventually they come to an end, and while we should play this uptrend with caution, we should still play it, until it doesn’t work. I’m prepared this week mentally to be ready to stay long and add more exposure or to get short when the market calls for it. 

The Fed will have their March meeting with an FOMC statement and press conference on Wednesday. That will likely be the pivot point for the market this week in terms of the direction this market ultimately takes.