Avoiding ‘Pinball Zone’

Hey 5-Star Trader,

September left us with a lot of baggage and the first half of October was spent trying to claw our way out of the “pinball zone.”

What is the “pinball zone?”

I like to use the term “pinball zone” when a market is stuck in chop. This behavior occurs when a trend is broken and the indexes are stuck between support and resistance, have frequent overnight news-related gaps, and/or days of wide range fueled by a lot of emotion.

When we are stuck in this zone it is best to proceed with caution. I like to look for relative strength leaders to lead the way to see which direction the market will break — either through support and a further correction, or a breakout toward new highs. 

Where are we today?

Typically at the end of the year we see a transition from weak to rally. After opening up to the downside, October is finally showing signs of that rally we were waiting on. However, I don’t think we are out of the woods yet.

Between now and the “Santa Rally,” I’ll be watching the market closely to make sure we stay on course. If the indexes can avoid running into key overhead resistance, I will be happy to embrace the action to the upside and hope it sticks all the way through the new year!

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