Market Update 12/16/09

No change in the outlook from yesterdays post. The Distribution chart above shows just how relatively rare these persistent narrow range days have become. The chart shows the distribution of the 5 day average intra day range (630AM-1:15) for the last 6 ES E-mini futures contracts (372 trading days) on the SP-500.

During this period a 5 day average range of 7-10 has happened only 1.34% of the time. The majority of the 1.34% has happened in the last few weeks, and as of this post stands at 7.75. The one constant in markets is periods of low volatility turn into periods of high volatility, and periods of high volatility are followed by periods of low volatility. The question is when.

As discussed in yesterdays post I am building a short position with SPY puts because of my Market Breadth indicators, and a down day or two is generally the easiest way for a reversion to the mean area of the range distribution.

Good Trading
KW