Despite the strong move yesterday, the market is not giving me the all clear yet. The SPDR S&P 500 ETF (NYSE:SPY) did manage to get over the channel it has been following on its recent correction, but did so on the fourth day of positive gains in a row. This bounce has put the McClellan Oscillator at 161.79, which is closer to overbought than oversold. While this doesn’t mean the markets can’t continue to shoot straight up, it does put many stocks in a position where they are more extended than I like for a typical swing trade. Zortrades has a good post revealing some of the mixed short term signals he is seeing in $SPY, along with how he is dealing with them. I am playing it much the same. If I see a decent chart setup, close enough to support, then I will take it. However, now is not the time to go all in expecting a rip roaring rally. If the markets truly are ending the recent consolidation, then hopefully something like the pattern below will play itself out. This would allow the markets to work off the recent buying pressure without damaging the breakout attempt.

However, keep in mind we are still heading into the low volume summer trading season, and it may be fraught with false moves and low volume.

Keep an open mind and stick to your trading setups.

Joey