Friday was another slow day for the markets, but also a market that continues its relentless push higher.  The stock indexes are all near or above their previous highs from the beginning of the year.  Obviously, the markets are going to consolidate, make another leg higher or form a double top and head lower.  So, what to do from a day trading perspective?

The Emini is extremely overbought and my normal judgment says the market has to move lower soon.  If you have been day trading the Emini markets lately, you know this market doesn't want to move lower.  I often use a simple 2-period RSI on the 5-minute charts to determine overbought / oversold levels.  Simply buying the market on dips below a reading of 5 has worked very well recently. 

Experience tells me that whenever I feel that there is no way a market is going to move lower, there is most likely a nasty selloff just around the corner.  There will have to be some type of news event that triggers a correction, similar to the last selloff where news from China and Greece triggered the slide.  When that will happen is the question. 

For now, you have to go with the flow.  I will favor the buy side until the momentum changes.  The market is basically in a type of consolidation mode with an upward bias right now and it is giving a lot of false sell signals.  Chasing breakdowns has been the worst trade in the last week.  Eventually it will work, but you have to wait for the momentum to shift.

Going into Monday, recent history tells us the market will move higher.  Mondays have been strong trend days and this could easily be one as the markets could breakaway.  Failure to move higher on Monday could be a sign of weakness for the markets.  Again, day traders should favor the long side until there is some negative news that can get the ball rolling for the bears. 

You can read more futures market analysis from Chuck Kowalski at www.FuturesBlog.com.