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S&P 500 Trading Range

I know that the past four months have been a terribly stressful time in the market – I live it everyday. But as I was reviewing various charts of the market today I noticed something pretty strange: in spite of all the volatility and the big days of up and down, we have been in a trading range on the market since mid October.

I've drawn the two horizontal blue lines on the chart so you can see it.

Any dips below the bottom line have been buying opportunities and any rallies above the top line have been selling signals. My best assessment is that this will continue for awhile longer then some catalyst will push through the upper blue line and take the market up to the 200-day moving average.

We raised cash in the market rally in late 2008 for taxable accounts that needed to generate tax losses. As the market has pulled back toward the bottom of the trading range, we've been investing that money in some of our favorite areas for 2009 (see the blog post on our 2009 Investment Strategy). As the market moves up to the upper blue line, we will be setting some trailing stops to protect gains but to not sell too soon in case this next move is the one that pushes to the 200-day moving average.