Markets in No Man's Land - And Why That's Actually Useful

*Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator. With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading. Below are some excerpts of Bob’s thoughts from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here.

Right now, the SPY is sitting in what I'd call no man's land - between a ceiling that's been acting as resistance and the 200-day moving average below it. A lot of traders look at a chart like that and see confusion. I look at it and see a map.

In my March 17th live session here at TradeZero, Zunaid and I talked through exactly where we are structurally in this market, what I'm actually watching for a short signal in the SPY, why the QQQ is telling a slightly different story, and which names I'm starting to position for when the recovery comes - because it will come.

Here's the thinking behind all of it.

Zunaid noticed I'd gotten a haircut. That's actually a good place to start.

I go every second Monday. My barber knows I'm coming, takes me any time within a half-hour window, and I'm in and out in 15 minutes. That consistency isn't just convenience - it's part of a routine that I genuinely believe matters for trading performance.

I once worked with a guy not a trader, no interest in becoming one - who would show up to our casual, bring-your-dog office in a dress shirt and pressed khaki pants every single day. I asked him why. He said, "If I take a shower and get ready for work, I get into a mindset."

That stuck with me. He wasn't dressing for the job he had. He was dressing for the decisions he needed to make. He's now running an Angel investing firm. There's something to that.

The routine is critical for you to follow your process when you're in a trade. Military leaders have talked about this for decades. It's not a new idea - but it's one that's easy to dismiss and costly to ignore. If you're trading from your bed, half-asleep, clicking buttons with no structure around you, you're going to make different decisions than you would sitting upright, showered, coffee in hand. Same chart. Different mindset. Different outcome.

Trading Between Two Levels

The SPY right now is trading between two significant areas: the horizontal resistance zone we've been tracking for weeks above, and the 200-day moving average below - currently around 565.

I want to be clear about one thing before I go any further: we are not in a bear market. We're not close to one.

A correction is a 10% decline from highs. A bear market is 20%. As of this session, we were roughly 5.4% off the highs and bouncing. The financial news channels were running wall-to-wall coverage about chaos in markets. That's 5.4%. Turn the volume down.

I tell people: only watch business news when you're not in a trade. When you're in a trade, all those headlines do is distort your decision-making. Your process should be doing the work - not the ticker at the bottom of the screen.

Why the 200-Day Moving Average Matters More in Equities Than Anywhere Else

Equity indexes are the only asset I've ever traded that carry a natural upward bias. Long-only mutual funds, pension accounts, retirement funds - they buy every month, consistently, regardless of the news. A lot of those people hear the headlines and aren't happy. But they don't change their plan.

That persistent buying creates what I think of as a "resting bid" in stocks. And it's why the 200-day moving average functions as one of the more powerful self-fulfilling prophecies in markets - because even in genuine bear markets, we tend not to stay below it for long.

The 2022 SPY bear market is the most recent real example. We broke below the 200, bounced above it, broke below again, then spent a sustained period beneath it before ultimately launching a new bull trend. That's the exception. Most of the time, dips below the 200 are brief.

For me to get genuinely concerned about the trend, I need two things - and as of this session, neither was present:

A close below the 200-day moving average

The 50-day moving average turning downward - the precursor to a death cross

We were nowhere near either of those conditions.

The Nasdaq-100 ETF (QQQ) is actually the stronger chart right now. It's already come close to testing its 200-day moving average and held. Twice.

The way I read this: rather than thinking about the QQQ as bouncing within a sideways box, I'd frame it as oscillating between the 50-day moving average above and the 200-day moving average below. The 200 is the stronger level - more data, longer timeframe, more significance. And so far it's holding.

The general principle here is worth stating clearly: anything with more data behind it is usually a stronger level. Weekly support is stronger than daily. Daily is stronger than 4-hour. That's not a nuance - it's the foundation of how I think about levels.

I also want to address something I hear a lot: the idea that any price where a significant transaction happened automatically becomes support or resistance. I spent time on an investment committee at a hedge fund. I've seen what actually drives some of those price levels - and it's not always technical. Sometimes a chief partner just wants out of a manager's fund by end of day, and a transaction happens at a specific price for no structural reason whatsoever. That price shows up on a chart. It doesn't mean anything.

For me, you need more than one reaction at a price level to call it significant. One event isn't a level. A pattern of behavior at a price is a level.

Stop Waiting. Start Preparing.

When you have no positions on - or minimal positions, as I do right now aside from one live Target trade - the temptation is to sit on your hands and wait for things to settle. That's the wrong instinct.

This is exactly when you should be building your watchlist. Because the recovery is coming. Six days from now, six months from now, a year from now - it's coming. The traders who are ready for it will take advantage of it. The ones who were waiting to "see how things play out" will chase it.

The Names I'm Watching

Here's where I'm focused heading into the next phase:

Apple (AAPL) - We had a potential double bottom setting up, but a sharp down move on Friday blew out the pattern. That setup is gone. What I'm watching now is whether Apple can break and hold above its 50-day moving average.

NVIDIA (NVDA) - The PE has compressed significantly, dropping from triple digits down into the 70s. NVIDIA is still NVIDIA - the business hasn't changed. But it's becoming less extended from a valuation standpoint. They've tested their 200-day moving average twice and held both times. That's the same double-test pattern we saw in the broader index. I think this one is more likely to break up than to break down.

Google (GOOGL) - Once it gets above the 50-day moving average, it also clears a small downward channel that's been forming. That's a cleaner setup than it looks.

Costco (COST) - This one is almost acting like it didn't get the memo about the soft market. While everything else has been soft, Costco has been trying to rally.

Domino's (DPZ) - There's actually a double bottom forming here. It doesn't hit the full 200% measured move, but it fits the 175% extension - and the right-hand low is within my acceptable range relative to the left. The issue? There's also a double top on the chart that hasn't been invalidated yet. Those two patterns are in conflict. My read is: if the double top plays out, the double bottom probably never triggers. But if the double bottom does trigger, trade it cautiously - it could still come back and break down. It's a watch, not a set-it-and-forget-it.

Why I've Shifted Toward Staples

I used to favor consumer cyclicals. Right now, I'm leaning into consumer staples - hence Target, hence Costco. These are businesses that usually perform regardless of the economic mood. People still need what they sell. That relative defensiveness matters in an environment where the macro signals are genuinely mixed.

I'm not going to ignore macro entirely. Crude oil right now is establishing a new range - I'd put USO somewhere between 103 and 119 - and I think there is a chance that this has more potential to drive recession risk than inflation risk at current levels.

My baseline view is that even once the current shock settles, prices are likely to remain elevated for some time. If conditions deteriorate, the range will likely break higher and the implications for equity markets get significantly more complicated.

I'm not making a forecast here. I'm naming a variable. The way this plays out will affect how aggressively I manage exits on any positions I'm holding. That's the honest use of macro context - not to predict direction, but to calibrate your risk posture when you're already in a trade.

A few things I said in this session that I want to make sure land:

The 200-day moving average on the SPY is the line I'm watching. Not the news. Not the 5% decline. The 200.

You don't need a bear market to get short. You need a signal. Right now I'm watching for a close below a specific trend line - if the reward-to-risk lines up, that's the trade.

When you have no positions, don't go to the beach. Build the watchlist. Know what you're going to trade when the next move sets up.

One bad headline, one ugly open - these don't change a trend. Close below the 200 and the 50 turning down are the conditions that would. We're not there.

Consistency in your process - your routine, your sizing, your entry and exit discipline - is more durable than any single trade setup. Build the habit. It compounds.

Stay patient. Stay prepared. The setup is coming.

This Blog (hereafter referred to as the “Content”) is produced by TradeZero. The Content may include the views and opinions of TradeZero and a third-party participant, Bob Iaccino. Bob Iaccino is compensated by TradeZero for participating in the Content. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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