Since early 2015, the market has had three distinct periods of sideways price congestion lasting anywhere between nine weeks and a whopping 27 weeks.
I've tracked these for you here each week, and in real time in my Stealth Profits Trader service.
Unlike what you might hear in the media, it's not only possible to make big money in sideways markets, it happens regularly - if you're patient and selective in trading the extremes that pop up across sectors in the most placid markets.
It's a great way to keep from "overtrading" when the market's not doing much.
But when the sideways motion stops and the market environment changes, it's a good idea to jump in with both feet.
That change is just what's starting to unfold right now. That means it's time to change tactics a bit and grab some opportunities to make money.
Check out these charts...
The Market Just Started Pushing Out of the Box
Just before the Memorial Day weekend, the market pushed outside the "box" for the first time in just shy of four months.
Here's what that action looks like on a chart:
Seeing a chart like this, with markets just outside of their tightly "boxed" trading range, always - always - prompts a "Really Big Question," one that, thanks to the charts, technical traders like me usually have a ready answer for...
"So, what happens next?"
Again, thanks to the charts, that answer is easier to come up with than you might think.
In the markets, "past is prologue," so we just have to look at the historical movement during the last three breakouts:
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As you can see in the chart, after all three of the last "boxed" market movements going all the way back to 2014, the sideways congestion, such as we've been dealing with since mid-February, was followed by a small downside move.
And then stocks started grinding higher.
What's happening now is only a little different. The breakout (that you can see on a tighter time frame on the top chart) has been a bit more pronounced.
But that doesn't change my expectations here. I expect this market will try and "catch its breath" before heading significantly higher.
I don't expect this breather will last long, so jump on stocks you've got on your shopping lists now and take the opportunity to add to any positions in quality companies.
Traders looking to make some quick cash on this downturn would do well to deal in short-dated puts on any one of a number of bearish or even leveraged "ultra-bearish" exchange-traded funds (ETFs). Of course, I've made two very specific trade recommendations for the next few days to my Stealth Profits Trader readers, and I'll let them know when to take profits on them. My readers can check those instructions out right here.
There's one more really interesting thing about a setup like this, given the climate of uncertainty here in the United States and overseas in the United Kingdom, where, after this weekend's terror attacks in London, we'll see a wide-open, up-in-the-air election take place the day after tomorrow.
Any negative news from the White House, No. 10 Downing Street, or the world at large will add some real rocket fuel to short positions, putting you in a great position to capitalize on those kinds of trades and getting you even better entry points to great stocks.
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About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.