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SPX (S&P 500 Index)

SPX (S&P 500 Index)

Why patience is sometimes the best trading strategy.I recently did a video to highlight the key levels to watch on the S+P. There is a convergence of resistance at 4017/83 (this is the location of the one-year downtrend, the 55-week ma and nearby resistance). I explained that success or failure at this key zone would be critical for direction over the next few months and this zone should go on your radar. I was accused of sitting on the fence and not giving a view. That was actually deliberate, for while I acknowledge that the overall trend is down and in theory ‘the trend is your friend’ and the market should fail here… there are 2 things on the chart which are nagging at me. The first is that despite a plethora of resistance this market is not backing away and the second is that I have a buy signal on the DMI indicator (admittedly the ADX is NOT above 25 so it is not a decent buy signal) BUT the +DI remains stubbornly above the -DI…..mmm…sometimes your best friend is actually your gut, or for me, 35 years of looking at charts gives me enough reason just to be cautious. So, at current levels there is not enough reason to cut out any long-term short positions (the downtrend and resistance remains intact after all) BUT I also cannot jump up and down and say this is a good buy either (as I say that pesky resistance remains) so from my point of view the safest way to trade is to sit tight until the chart gives you another signal. Call this sitting on the fence if you must, but sometimes the best trade is just patience. Disclaimer: The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.

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The Nature of Diagonals and Triangle I love trading these patterns. They are my favorites when I trade. Sometime it's difficult to spot because they need to complete the formation. Diagonals aka wedges, usually people are confused with continuation triangle and get squeezed. Has 2 types: leading and ending. Leading has 2 entry points. If it breaks the first entry, wait for second one to enter an entry. Ending is where the trend is ended and nature going back to where it started. Continuation triangle is a consolidate pattern where it moves in a range smaller and smaller until it bursts a final move to complete a trend. Triangle can take quite some times to finish the formation. Diagonals can happen a lots but triangle is very rare.

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How NOT to loose money, 1st do not trade people's ideas do your Home work, do your research and learn learn learn till you become aware of what is going on in mkts and then being able to choose the right path for your and being able to distinguish right ideas and analysis from the wrong ones. *****Passing this cool info (Not mine) : 2. Set realistic expectations When you're investing, your expectations of what you could earn should be realistic. And sometimes, measures like average rates of return can be misleading. For example, if you invested in large-cap stocks between 1926 and 2020, you would've earned an average rate of return of 10.2%. And if you earned this rate of return over 30 years, $100,000 invested would've grown to $1.84 million. But during that same time period, you would've earned a high of 54% in 1933 and a low return of -43% during 1931. If you invested for the first time during a year of losses, it could make you wary of investing. Understanding that your returns won't be linear but instead, an average of positive, negative, and flat returns is important. And understanding this may help you withstand the bad years. 3. Know the difference between a realized and unrealized loss When you look at your account balance and see that it's lower than it was the month before, it may feel as if you've lost money. But the numbers you see on your statement or when you log in to your account are called unrealized losses or gains. These numbers change for better or worse throughout a day of stock market activity and are only considered actual losses or gains when you realize them by selling your holdings. For example, if your account balance was $10,000 last month and you experienced losses this month, it may now be worth $9,000. But you would only lose money in reality if you sell this investment before it gets back to its original value. Over the long term, the stock market has always increased in value, and your investments should, too, as long as you stay invested. 4. Have an appropriate time horizon How soon you need your money could impact how well you keep your money invested during stock market crashes. If you won't need your money for 25 years and you suffer a 30% loss, you may shrug it off knowing that your account value could return back to that value in a few years. But if you plan on using the money next year, you may panic at the idea of losing any of it. Before you invest one penny, think about your time horizon. And the closer it is, the more conservatively you should invest. Without the threat of missing your goal looming over your head, losses may not seem so devastating, and you'll be less likely to give up on investing due to a short-term drop. 5. Control emotions Controlling your emotions is no easy task, and when you're losing money, it can feel like it will go on forever. But declines have never lasted forever. Learning how you can control your emotions when you're feeling this way can be the difference between experiencing subpar returns that lag benchmarks or keeping pace with them. When you feel as if the sky is falling and it seems as if there's no end in sight, revisiting stock market corrections of the past can be helpful. Even during some of the periods of the most extreme losses, investors who stayed the course often recouped their losses within a few years. From 2000 through 2002, if you'd invested only in large-cap stocks, you would've lost about 38% in total. If you had $100,000, it would've decreased to around $62,000. But by 2006, you would've regained all of your money and been ahead slightly.. 6. Invest in line with your risk appetite How do you feel about volatility? Do you barely notice it and realize that it's a normal part of a market cycle? Or does it make your stomach drop every time it happens? You can earn more over the long term if you have more aggressive investments, but in a year of losses, these types of investments could also lose more money. And if the losses seem too big, these investments may be too risky for you. If this happens, staying invested may be harder. Making sure that you're invested in line with your risk tolerance can help you prevent this. You should also find an asset allocation model that suits your appetite for risk, even if it yields a lower average rate of return. Investing should help you meet your goals instead of putting you further away from them. While your account value increasing or decreasing regularly is normal, you don't have to lose money. And controlling your fears, making sure you hold suitable investments, having realistic expectations about how your accounts will grow and the time frame in which those gains will happen can help you avoid it.

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SPX. The Certainty Trap ‘Never’ &‘always’ have no place in MKTS!Just passing this cool info written by a guy called Ben Carlson. - Ben discusses the differences between probability and certainty: "There are two arguments I see on a regular basis that show up as a result of data overload: …because that’s never happened before. …because that’s what’s always happened before. -The problem with this line of thinking is that it can lead investors to fall into what I like to call the certainty trap. It’s this all-or-nothing line of thinking that causes so many to constantly attach extremes to every single market move or data point they see. The beginning of the recovery or the end of the world is always right around the corner. The assumption is that we’re always either at a top or a bottom when most of the time the markets are probably somewhere in the middle." -The reason the investing certainty trap is so easy to fall for is because historical data can feel so safe and reassuring. Look here, my data says that this has never (always) happened in the past. Surely this trend will continue. I’ll just sit here and wait for my profits to start rolling in. -‘Never’ and ‘always’ have no place in the markets because no one really knows what’s going to happen next. ‘Most of the time’ is a much more reasonable goal, because nothing works forever and always in the markets. If it did everyone would simply invest that way. I think a much more levelheaded approach is to follow the Jason Zweig 10 word investment philosophy: -Anything is possible, and the unexpected is inevitable. Proceed accordingly.

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Our Trading Manifesto Hello everyone! In this post we will present and explain our trading system. Our trading system condensates everything we have learned from hard work, study and even harder lessons received in these years of trading. It is constantly evolving and updating, we are always ready to question some aspects of our system and research tools and strategies that can improve it. We will distinguish and explain three different aspects of which the system is composed: Analysis, Execution and Research. Analysis The analytical part concerns all the tools and the strategies that we use to formulate an hypothesis on the direction of the market, and consequently develop a trading strategy. A trading strategy is composed by: -an Invalidation Level: a price level that, if crossed, proves our hypothesis wrong. This is the limit level at which stop losses can be set. -a set of Entry Points/Levels: composed by price levels of chart points that according to our analysis can trigger the move that we are hypothesizing. -a set of Target Points/Levels: composed by price levels of chart points where the move that we are hypothesizing can end. Once a trading strategy is determined, it will be implemented in the executive part. But on what is our analysis based? Elliott Wave Theory, Pattern Trading and Sentiment Analysis. We believe that the chart encodes all the information available. News and events are priced in the market instantaneously. The fundamentals are revealed simultaneously with the price action. Any news or fundamental consideration is just one piece of the puzzle. Price is the synthesis of the result. Price moves because of mass psychological dynamics inducing people to buy and sell. These dynamics are observable in the sentiment and in the fundamentals, and manifest themselves in chart patterns. The composition of chart patterns forms Elliott Waves structures. We don't use this approach as a mix of independent tools, but in a holistic and comprehensive approach. We analyze the wave structure of the market starting from higher timeframes, assessing probabilities of different scenarios by analyzing chart patterns and using different tools related to the sentiment, such as Smart Money Indicator, Volume Profiles, Order Blocks, etc. We use the same approach in smaller timeframes to set the trading strategy (Entries, Targets and Invalidation Level). Execution The executive part of our trading system involves risk management, placing orders in the market, and managing active trades. Once we have developed a trading strategy, we have a set of entries, a set of targets and an invalidation level. We have to use them to define a Trading Plan. Here is the first rule of risk management: we can not lose more than 1.5% of the trading capital for each trading plan. You don't have to depend on one trade. One trade should not be decisive. Trading must not be funny. This is the only way to decrease your biases and your emotional involvement. So in a Trading Plan we decide how many trades to open, how much risk to allocate on each trade (NOT MORE THAN 1.5% TOTAL), at what price execute the trade, and where to set stop losses. No stop loss can be set above the invalidation level. If prices reaches the invalidation level we are OUT. No matter if prices then follows the hypothesized direction, market will always provide other opportunities. We also plan where to take profits at the pre-determined Target Levels. Research The research part of our system is our constantly updating and challenging our knowledge studying new tools, approaches, strategies. Knowledge is dynamic and always updating. You never stop learning. We will post all our analysis and trades. Stay tuned and happy trading! :)

Education

🟨 HOW TO trade stocks in DEEP BASES A DEEP CORRECTION = a correction more than 25-30% within the consolidation period. Sometimes a stock might correct more especially in a volatile bear market. Deeper correction are more risky as they are more failure prone - use these ideas to put probabilities on your side. The checklist 1. You want as much time away from that correction as possible (at least 1 year) 2. Many bases (iterations) on the right side (currently 3) 3. Explosive moves over the bottom💥 (currently +100%) General Rules The bigger the base the more time you want. Always look to the left to see: - Where is the supply? - How much is the supply? (could use Volume Profile free tools on Trading View) - How is the stock acting as it reaches this supply? (Sharp pullbacks or controlled pullbacks)

Education

by TintinTrading

How to trade using Value Areas and POC?A few key concepts when using Market Profile in your trading: 1) Point of Control (POC) acts as price magnets, as they represent the price level where most time was spent during a trading day. Price tends to gravitate towards them. 2) Naked (Not visited) POC acts as stronger magnets than visited POCs. 3) When price enters / breaks into a Value Area, which represents a range of "fair value", price tends to visit the other end of the Value Area. For example above, the price breaks up from the Value Area Low before end of day yesterday, hit the Value Area High this morning. You definitely won't find these key levels and ranges with traditional support and resistance lines drawing methods. Using Market Profile will give you the edge to become a better trader. See my previous 2 posts:

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0% Inflation very soon?United States Inflation Rate, Year-over-Year, 1914-2022 chart ---------------------------------------------------------------- Why do I think inflation will go down to 0%? Inflation is currently at the main trendline (established in 1920). This is a very strong resistance, and as a general rule, do not short a support or long a resistance. In other words, you don't want to speculate on inflation increasing when inflation is at its critical point. FED cares about their charts, and they also want the charts to look great. That's why they will push inflation down. ---------------------------------------------------------------- Why the Inflation Rate Matter? The inflation rate demonstrates the health of a country's economy. It is a measurement tool used by a country's central bank, economists, and government officials to gauge whether action is needed to keep an economy healthy. That's when businesses are producing, consumers are spending, and supply and demand are as close to equilibrium as possible. A healthy rate of inflation is good for both consumers and businesses. During deflation, consumers hold on to their cash because the goods will be cheaper tomorrow. Businesses lose money, cutting costs by reducing pay or employment. That happened during the subprime housing crisis. In galloping inflation, consumers spend now before prices rise tomorrow. That artificially increases demand. Businesses raise prices because they can, as inflation spirals out of control. When inflation is steady, at around 2%, the economy is more or less as stable as it can get. Consumers are buying what businesses are selling. ---------------------------------------------------------------- How is inflation measured? There are several ways to measure inflation, but the U.S. Bureau of Labor Statistics uses the consumer price index. The CPI aggregates price data from 23,000 businesses and 80,000 consumer goods to determine how much prices have changed in a given period of time. If the CPI rises by 3% year over year, for example, then the inflation rate is 3%. The Fed, on the other hand, relies on the price index for personal consumption expenditures (PCE). This index gives more weight to items such as healthcare costs. ---------------------------------------------------------------- How do you hedge against inflation? Because inflation causes money to lose value over time, hedging against it is an important part of any sound investing strategy. Investors use a diversified portfolio with a variety of asset types to offset inflation and ensure that the overall growth of their portfolio outpaces it. ---------------------------------------------------------------- YEAR - INFLATION RATE YOY - FED FUNDS RATE - BUSINESS CYCLE (GDP GROWTH) - EVENTS AFFECTING INFLATION 1929 0.6% NA August peak Market crash 1930 -6.4% NA Contraction (-8.5%) Smoot-Hawley 1931 -9.3% NA Contraction (-6.4%) Dust Bowl 1932 -10.3% NA Contraction (-12.9%) Hoover tax hikes 1933 0.8% NA Contraction ended in March (-1.2%) FDR's New Deal 1934 1.5% NA Expansion (10.8%) U.S. debt rose 1935 3.0% NA Expansion (8.9%) Social Security 1936 1.4% NA Expansion (12.9%) FDR tax hikes 1937 2.9% NA Expansion peaked in May (5.1%) Depression resumes 1938 -2.8% NA Contraction ended in June (-3.3%) Depression ended 1939 0.0% NA Expansion (8.0% Dust Bowl ended 1940 0.7% NA Expansion (8.8%) Defense increased 1941 9.9% NA Expansion (17.7%) Pearl Harbor 1942 9.0% NA Expansion (18.9%) Defense spending 1943 3.0% NA Expansion (17.0%) Defense spending 1944 2.3% NA Expansion (8.0%) Bretton Woods 1945 2.2% NA Feb. peak, Oct. trough (-1.0%) Truman ended WWII 1946 18.1% NA Expansion (-11.6%) Budget cuts 1947 8.8% NA Expansion (-1.1%) Cold War spending 1948 3.0% NA Nov. peak (4.1%) 1949 -2.1% NA Oct trough (-0.6%) Fair Deal, NATO 1950 5.9% NA Expansion (8.7%) Korean War 1951 6.0% NA Expansion (8.0%) 1952 0.8% NA Expansion (4.1%) 1953 0.7% NA July peak (4.7%) Eisenhower ended Korean War 1954 -0.7% 1.25% May trough (-0.6%) Dow returned to 1929 high 1955 0.4% 2.50% Expansion (7.1%) 1956 3.0% 3.00% Expansion (2.1%) 1957 2.9% 3.00% Aug. peak (2.1%) Recession 1958 1.8% 2.50% April trough (-0.7%) Recession ended 1959 1.7% 4.00% Expansion (6.9%) Fed raised rates 1960 1.4% 2.00% April peak (2.6%) Recession 1961 0.7% 2.25% Feb. trough (2.6%) JFK's deficit spending ended recession 1962 1.3% 3.00% Expansion (6.1%) 1963 1.6% 3.5% Expansion (4.4%) 1964 1.0% 3.75% Expansion (5.8%) LBJ Medicare, Medicaid 1965 1.9% 4.25% Expansion (6.5%) 1966 3.5% 5.50% Expansion (6.6%) Vietnam War 1967 3.0% 4.50% Expansion (2.7%) 1968 4.7% 6.00% Expansion (4.9%) Moon landing 1969 6.2% 9.00% Dec. peak (3.1%) Nixon took office 1970 5.6% 5.00% Nov. trough (0.2%) Recession 1971 3.3% 5.00% Expansion (3.3%) Wage-price controls 1972 3.4% 5.75% Expansion (5.3%) Stagflation 1973 8.7% 9.00% Nov. peak (5.6%) End of gold standard 1974 12.3% 8.00% Contraction (-0.5%) Watergate 1975 6.9% 4.75% March trough (-0.2%) Stop-gap monetary policy confused businesses and kept prices high 1976 4.9% 4.75% Expansion (5.4%) 1977 6.7% 6.50% Expansion (4.6%) 1978 9.0% 10.00% Expansion (5.5%) 1979 13.3% 12.00% Expansion (3.2%) 1980 12.5% 18.00% Jan. peak (-0.3%) Recession 1981 8.9% 12.00% July trough (2.5%) Reagan tax cut 1982 3.8% 8.50% November (-1.8%) Recession ended 1983 3.8% 9.25% Expansion (4.6%) Military spending 1984 3.9% 8.25% Expansion (7.2%) 1985 3.8% 7.75% Expansion (4.2%) 1986 1.1% 6.00% Expansion (3.5%) Tax cut 1987 4.4% 6.75% Expansion (3.5%) Black Monday crash 1988 4.4% 9.75% Expansion (4.2%) Fed raised rates 1989 4.6% 8.25% Expansion (3.7%) S&L Crisis 1990 6.1% 7.00% July peak (1.9%) Recession 1991 3.1% 4.00% Mar trough (-0.1%) Fed lowered rates 1992 2.9% 3.00% Expansion (3.5%) NAFTA drafted 1993 2.7% 3.00% Expansion (2.8%) Balanced Budget Act 1994 2.7% 5.50% Expansion (4.0%) 1995 2.5% 5.50% Expansion (2.7%) 1996 3.3% 5.25% Expansion (3.8%) Welfare reform 1997 1.7% 5.50% Expansion (4.4%) Fed raised rates 1998 1.6% 4.75% Expansion (4.5%) LTCM crisis 1999 2.7% 5.50% Expansion (4.8%) Glass-Steagall repealed 2000 3.4% 6.50% Expansion (4.1%) Tech bubble burst 2001 1.6% 1.75% March peak, Nov. trough (1.0%) Bush tax cut, 9/11 attacks 2002 2.4% 1.25% Expansion (1.7%) War on Terror 2003 1.9% 1.00% Expansion (2.9%) JGTRRA 2004 3.3% 2.25% Expansion (3.8%) 2005 3.4% 4.25% Expansion (3.5%) Katrina, Bankruptcy Act 2006 2.5% 5.25% Expansion (2.9%) 2007 4.1% 4.25% Dec peak (1.9%) Bank crisis 2008 0.1% 0.25% Contraction (-0.1%) Financial crisis 2009 2.7% 0.25% June trough (-2.5%) ARRA 2010 1.5% 0.25% Expansion (2.6%) ACA, Dodd-Frank Act 2011 3.0% 0.25% Expansion (1.6%) Debt ceiling crisis 2012 1.7% 0.25% Expansion (2.2%) 2013 1.5% 0.25% Expansion (1.8%) Government shutdown. Sequestration 2014 0.8% 0.25% Expansion (2.5%) QE ends 2015 0.7% 0.50% Expansion (3.1%) Deflation in oil and gas prices 2016 2.1% 0.75% Expansion (1.7%) 2017 2.1% 1.50% Expansion (2.3%) 2018 1.9% 2.50% Expansion (3.0%) 2019 2.3% 1.75% Expansion (2.2%) 2020 1.4% 0.25% Contraction (-3.4%) COVID-19 2021 7.0% 0.25% Expansion (5.9%) COVID-19 2022 8.3% 3.25% Contraction (-1.6%) As of Sept. 21. 2022 2023 2.7% (est.) 2.8% (est.) Expansion (2.2%) March 2022 projection

Education

by UnknownUnicorn2537518

Swing Trading using Island Reversals Island Reversal are powerful reversal signals so as a swing trader I'm always searching these out and/or watching them form. The most powerful Island Reversals generally occur around some sort of news event (or sometimes prior to a news event if Wall Street is in the "know") and typically leads to fairly violent initial move to the upside or downside. What is important about the "strongest" of these reversals is that the "white space" will remain for some time and/or never clears! Below is the chart of SPX prior to the Covid vaccine approval announcement: Who can forget the Mother of all Islands! JPM- TSLA- What are some of your favorite Island Reversals?

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SPY - How to project fear if it had a number...A special today... I just saw this and thought it was a good opportunity to show how I use Fibonacci and geometric symmetry to help do some projections. Here are the steps for the SPY hourly charts currently... 1. Draw a Fibo retracement from the last high (22/7) to the last low (22/7) 2. Note that the rebound (currently) only got to the 0.5 (50%) Fibo retracement level. So, we expect and extension to the 1.5 (150%) level. 3. Draw an arrow line from the high to the low, duplicate it and shift it across to the last lower high, from the 50% retracement level (white Fibo retracement drawing). This is the rough estimation and extension. 4. In an opposing manner, draw the next Fibo retracement from the low on 14/7 to the high on 22/7. Clearly, this retracement is in the opposing direction, extension to the upside. This is the grey Fibo retracement. 5. Note how the confluence of the 0.618 (61.8% / 62%) level coincides and aligns with the opposing 50% Fib level? This confluence should increase the likelihood and significance of this support/resistance level. 6. Circle the spot. That is where it should happen. Usually it is an early estimate. For more accuracy, you can use Gann fans to help in determining the time lines forward. I find this useful. Ta-da! Now we wait to see what happens over the next two days or so... Have fun and do leave a comment if this is helpful, or just appears nonsense to you. Ask any question if you'd like! First time I am doing something like this... hope you all enjoy it! Cheers!

Education

by Auguraltrader

Updated

The Four Quadrants of the Economic Cycle Use this as tailwinds for your trading and investments to spot the capital inflows when the time comes. I would say we are likely in the inflationary bust stage (1) coming out of the disinflationary boom stage (4) for the last decade and beyond. I would dare say the Inflationary bust stage is next (2) as the central banks try to kill inflation by raising rates and destroying asset prices. To fix the economic damage they would have to eventually change their monetary policy which would then bring us into an inflationary boom (3) The cycle repeats over and over but I'm positioning for the Inflationary boom stage (3) as I believe this stage will last many years.

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Using MACD To Identify Long Term Trends How can we tell whether a downturn is just a normal part of a solid bull market, or the beginning of a major downdraft? We need to have a way to identify when long-term trends are changing. One way to guard against being caught on the opposite side of a trend is to apply technical indicators that can isolate major trend shifts and reduce psychological biases. Specifically, technical indicators based on moving averages reduce the noise that characterizes the stock market. We can argue about the fundamental valuation of a company, but we cannot argue whether a stock’s price is above or below historical moving averages. In analysis based on moving averages, the focus is less on why the market should move up or down, and more on what the current market dynamics are from a supply-and-demand perspective. Today there are more opportunities than ever for a decoupling of price from fundamentals. This is fueled in part by retail investors, who have access to information and tools that previously were available only to institutional investors, and social media in which market players can talk up stocks. This is where MACD, or “moving average convergence-divergence” indicator, comes in. It was developed in the 1970s and is widely accepted by technical analysts as one of the best ways to identify prevailing trends. It is available on just about every charting platform, most of which allow for revision of the indicator’s standard parameters. The standard MACD consists of a spread between the 12-period and 26-period exponential moving averages of a stock’s closing prices, which is then smoothed by a signal-generating line derived from the 9-period exponential moving average of the spread. A long-term trend-following overlay is afforded by the MACD applied to the monthly bar chart of the S&P 500 Index (SPX). It provides a visual gauge of the primary trend, and it identifies major turning points when the two lines that comprise the MACD cross over. The crossovers provide “buy” signals and “sell” signals that may more clearly indicate when the long-term trend has shifted. To illustrate this, the chart goes back 1999. The price bars are colored green to reflect positive or improving MACD readings, and red to reflect negative or deteriorating MACD readings. Bullish and bearish crossovers are denoted by up and down arrows. Generally, it has been good to be long equities when the bars are colored green, which has typically been associated with uptrends. It tends to be a more difficult environment for investors when the bars are colored red, which is typically associated with a sideways or lower trend. It was 2008 that technical analysis really became noticed on Wall Street. The SPX had seen its monthly MACD flash a “sell” signal in November 2007, a month before it broke down, and it did not flash a “buy” signal until a few months after the March 2009 low. The bearish reversal caught many off guard, but those who used the MACD were quicker to minimize exposure, bringing attention to the field of technical analysis as a viable discipline for risk management. MACD “buy” and “sell” signals do not capture pivots until after-the-fact, but the signals are not too late to take advantage of long-term turnarounds. Sometimes they even precede bear markets, as in 2000 and 2007. Note that the MACD flashed a “sell” signal in January 2000, before the tech bubble burst, and did not flip to a “buy” signal until May 2003, before a sustained bull market move began. Whipsaws are not uncommon, but they are short-lived, and often associated with shifting trends like in 1999 and 2015, so even false signals can have value. The bulk of uptrends and downtrends were captured by the MACD despite its inherent lag. The MACD is not a trading system, so a “sell” signal need not be interpreted as a reason to move to 100% cash in a portfolio, but rather an indication to position more defensively. Traders often refine long-term MACDs with shorter-term MACDs, evaluating them alongside other momentum and overbought/oversold indicators for a holistic view. Since technical analysis is based on concrete data, there is broad agreement on the merits of MACD, although different preferences and parameters can be applied. So, what does MACD tell us about the current environment? As it stands, the SPX is currently in a bear market cycle and has been since the MACD flashed a “sell” signal at the end of March 2022. Since the “sell” signal, the SPX is down roughly 16% and continues to trend lower. In a down-trending environment, breakouts are more likely to fail, and breakdowns more likely to see downside follow-through. Overbought readings instill fear, whereas oversold readings instill healthy skepticism. Psychological biases, notably fear and greed, are what makes a market a market, and they can be managed with unbiased input from the MACD. Clear-eyed analysis of the underlying momentum of the market can help us stay on the right side of the prevailing long-term trend. Adapted from “The New Market Momentum: Reading the Technical Indicators” by Katie Stockton, published on Future.com (June 15, 2021). Katie Stockton, CMT Founder and Managing Partner Fairlead Strategies Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.

Education

by CMT_Association

Why Price Matters - SPX to $4200 The SPX reversal to $4,200 provides an opportunity to learn from the pros and get back to the basics of trading. This means understanding the numbers and being able to buy things wholesale and sell them at a retail price. With this knowledge, you can be a successful trader.

Education

19:47

📊Bitcoin consolidation pattern! Read the description!Hi friends, you've probably noticed that Bitcoin and cryptocurrencies start to rise or fall after consolidation. In this idea I will explain why consolidations happen, how to use this in cryptocurrency market analysis and where the next ATH for Bitcoin will be. 📊What is a consolidation? Consolidation is the small price range. Unlike a bullish or bearish trend, a consolidation is the absence of a trend. As we can see from the chart after consolidations price fall or rise for amazing %. In trading it calls "become volatile". 🔸Why consolidations happen? Actually, consolidations happen because of traders sentiment. If the price don`t move in any side this is bad for most of them. As we know, the biggest part of traders earn on the huge price movements. So when the price start consolidate there are no bull or bear power and price move in the range. 🔸What happend when the price leave the consolidation range? Consolidation is like a spring. The harder you squeeze it, the more it bounces back. It's the same with the price. For example, Bitcoin starts to rise or fall a lot when it comes out of consolidation, the spring rebound, and this has happened in all the examples in Bitcoin's history. 🔸What will happen to BTC next? For more 516 days BTC price is in $29-64k consolidation range. Now we can see the largest consolidation since 2015-2016 before the price reached ATH in 2017. 📈If we follow the rule that the longer the consolidation, the bigger the fall/rise, it's actually hard to predict what will happen next. In any case, Bitcoin will not be able to grow by 5000% in the next bull cycle because of its huge capitalization, but 600-900% growth from global lows ($20-26k) is quite possible. 🚩Traders, what do you think about this pattern? What will be the next ATH for Bitcoin in the next bull cycle based on this rules? Write in the comments, let's discuss it together. 💻Friends, press the "like"👍 button, write comments and share with your friends - it will be the best THANK YOU. P.S. Personally, I open an entry if the price shows it according to my strategy. Always do your analysis before making a trade.

Education

by Yuriy_Bishko

S&P500 Index - Multi timeframe analysis with the Ichimoku Cloud Multi timeframe analysis of the S&P500 Index using the Ichimoku Kinko Hyo with original 9,26,52,26 settings, i have also added Volume Profiles (VPVR) and (VPFR) onto the charts. 1 DAY CHART: The Ichimoku Cloud Conversion Line (Tenkan Sen) is indicating that the Mid-Point of the Short-term momentum is upwards at the moment. This will possibly change to sideways or even downwards on the open of the next daily candle. The Ichimoku Cloud Base Line (Kijun Sen) is indicating that the Mid-Point of the Mid-term momentum is sideways at the moment. Note that support at the Base Line (Kijun Sen) has failed on this 1 day timeframe. The Ichinoku Cloud Lagging Span (Chikou Span) is indicating that momentum at the moment…… is downwards. Note that the Lagging Span (Chikou Span) is still under the price from 26 periods ago and is i the Bearish Zone under the Kumo (Cloud). The Kumo (Cloud) is still red. Note that the Leading Span A (Senkou Span A) has started to move upwards but will swing back down if the price continues to drop. Note that the Leading Span A (Senkou Span A) is still under the Leading Span B (Senkou Span B). Be on the lookout for if/when the Leading Span B (Senkou Span B) starts to move downwards on this 1 day timeframe indicating further strength to the downside. Note that the price is still in the Bearish Zone under the Kumo (Cloud) on this 1 day timeframe. Note that on this 1 day timeframe, the Price is under all of the Ichimoku Cloud indicators so let’s have a look at the 1 week timeframe and see if we have any Ichimoku support levels. Volume Profiles: Note that the Price is still under its Volume Profile Visible Range Point of Control (VPVR POC) for this charts visible range. Not that the Price is still under its Volume Profile Fixed Range Point of Control (VPFR POC) for the fixed range of 14x daily candles i have selected. 1 WEEK CHART: The Ichimoku Cloud Conversion Line (Tenkan Sen) is indicating that the Mid-Point of the Short-term momentum is downwards at the moment. Note that the price has found some resistance from the Conversion Line (Tenkan Sen) on this 1 week timframe. The Ichimoku Cloud Base Line (Kijun Sen) is indicating that the Mid-Point of the Mid-term momentum is sideways at the moment. Note that the Conversion Line (Tenkan Sen) is still under the Base Line (Kijun Sen) indicating strength for short term downwards momentum. The Ichinoku Cloud Lagging Span (Chikou Span) is indicating that momentum at the moment…… is downwards. Note that the Lagging Span (Chikou Span) is still under the price from 26 periods ago. Note that the Lagging Span (Chikou Span) has dropped below the Leading Span A (Senkou Span A) and is now back in the Equilibrium Zone on this 1 week timeframe. The Kumo (Cloud) is still red on this 1 week timeframe. Note that the Leading Span A (Senkou Span A) has started to move downwards and is still under the Leading Span B (Senkou Span B). Note that the price is still in the Bearish Zone under the Kumo (Cloud) on this 1 week timeframe. Note that on this 1 week timeframe, the Price is under all of the Ichimoku Cloud indicators so let’s have a look at the 2 week timeframe and see if we have any Ichimoku support levels. Volume Profiles: Note that the Price is still under its Volume Profile Visible Range Point of Control (VPVR POC) for this charts visible range. Not that the Price is still under its Volume Profile Fixed Range Point of Control (VPFR POC) for the fixed range of 11x weekly candles i have selected. 2 WEEK CHART: The Ichimoku Cloud Conversion Line (Tenkan Sen) is indicating that the Mid-Point of the Short-term momentum is sideways at the moment. The Ichimoku Cloud Base Line (Kijun Sen) is indicating that the Mid-Point of the Mid-term momentum is sideways at the moment. Note that the Conversion Line (Tenkan Sen) is still under the Base Line (Kijun Sen) indicating strength for short term downwards momentum. The Ichimoku Cloud Lagging Span (Chikou Span) is indicating that momentum at the moment…… is downwards. Note that the Lagging Span (Chikou Span) is still under the price from 26 periods ago but is still in the Bullish Zone above the Kumo (Cloud). The Kumo (Cloud) is still green. Note that the Leading Span A (Senko Span A) is still above the Leading Span B (Senkou Span B). Note that the Leading Span A (Senkou Span A) is moving sideways at the moment but the Leading Span B (Senkou Span B) is moving upwards, be on the lookout for if the Leading Span A (Senkou Span A) starts to move closer towards the Leading Span B (Senkou Span B). Be on the lookout if the price drops below and closes below the Leading Span A (Senkou Span A) into the Equilibrium Zone on this 2 week timeframe. Note that the price is still in the Bullish Zone above the Kumo (Cloud) on this 2 week timeframe. Note that on this 2 week timeframe, the Price is under the Conversion Line (Tenkan Sen) and Base Line (Kijun Sen) but still has the Leading Span A (Senkou Span A) and Leading Span B (Senkou Span B) as potential support levels. Let’s have a look at the 1 month timeframe and see if we have anymore Ichimoku support levels. Volume Profiles: Note that the Price is still under its Volume Profile Visible Range Point of Control (VPVR POC) for this charts visible range. Not that the Price is still under its Volume Profile Fixed Range Point of Control (VPFR POC) for the fixed range of 6x 2 weekly candles i have selected. 1 MONTH CHART: The Ichimoku Cloud Conversion Line (Tenkan Sen) is indicating that the Mid-Point of the Short-term momentum is sideways at the moment. The Ichimoku Cloud Base Line (Kijun Sen) is indicating that the Mid-Point of the Mid-term momentum is upwards at the moment. Note that the Conversion Line (Tenkan Sen) is still above the Base Line (Kijun Sen) indicating strength for short term sideways momentum as the indicator is moving sideways at the moment. The Ichinoku Cloud Lagging Span (Chikou Span) is indicating that momentum at the moment…… is downwards. Note that the Lagging Span (Chikou Span) is still above the price from 26 periods ago and is still in the Bullish Zone. The Kumo (Cloud) is still green. Note that the Leading Span A (Senkou Span A) has started to move upwards but may swing back down if the price continues to drop on this 1 month timeframe. Note that the Leading Span A (Senko Span A) is still above the Leading Span B (Senkou Span B). Be on the lookout for if the Leading Span A (Senkou Span A) starts to move closer towards the Leading Span B (Senkou Span B). Note that the price is still in the Bullish Zone above the Kumo (Cloud) on this 1 month timeframe. Note that on this 1 month timeframe, the Price is under the Conversion Line (Tenkan Sen) but still has the Base Line (Kijun Sen) Leading Span A (Senkou Span A) and Leading Span B (Senkou Span B) as potential support levels. Volume Profiles: Note that the Price is still above its Volume Profile Visible Range Point of Control (VPVR POC) for this charts visible range. Not that the Price is still under its Volume Profile Fixed Range Point of Control (VPFR POC) for the fixed range of 6x monthly candles i have selected. Notes: Please remember that the Conversion Line (Tenkan Sen) & Base Line (Kijun Sen) are not SMAs or EMAs they are X amount high/low period midpoints in whatever timeframe you are in, so they should not be used as SMA or EMAs. Note that there are other aspects to the Ichimoku Cloud which make it a very complete system such as Price Theory, Wave Theory and Time Theory but I won’t go into those on this post. Conversion Line (Tenkan Sen) = Highest High + Highest Low calculation over 9 Periods = Blue Line. Base Line (Kijun Sen) = Highest High + Highest Low calculation over 26 Periods = Red Line. Lagging Span (Chikou Span) = Today’s price displaced back 26 Periods = Green Line. Leading Span A (Senkou Span A) = Tenkan Sen and Kijun Sen calculation value displaced ahead 26 Periods = Cloud Green Line. Leading Span B (Senkou Span B) = Highest High + Highest Low over 52 Periods Value displaced ahead 26 Periods = Cloud Red Line. Bullish Zone = Above the Cloud. Equilibrium Zone = Inside the (Kumo) Cloud can be Green or Red. Bearish Zone = Below the Cloud. This was just a post to show how you can use the Ichimoku Kinko Hyo in multiple timeframes for support, resistance & momentum, so I hope this post has been helpful with your trading and understanding of the Ichimoku Cloud. So in which direction is the S&P500 Index going to go...... i leave up to you to make your own minds up ;-).

Education

by entertheroach

Bond - Equity Correlation: The Most Important Question?TVC:US10Y TVC:NYA A reminder that falling bond yields are synonymous with higher bond prices. In other words, a downtrend in yield equates to a bull market in bonds. In January, bonds were still in a technical bull market as defined by the broad declining channel that had contained the 40 year bull market. In March the break of that downtrend turned the macro trend from bullish to neutral. Now, all that is left to define a bearish trend is a substantive violation of the 3.25% pivot zone. More recently, after testing the major macro pivot in the 3.25% zone, ten year Treasury yields have fallen sharply. The decline begs the question: Is the decline the result of the decades long negative correlation between equity and fixed income reasserting itself on the back of equity weakness or is it simply the beginning of a relief rally created by the combination of major support and a deeply oversold condition? While it is too soon to answer the question with any degree of certainty, it is clear that the outcome will have vitally important macro/portfolio implications. My guess is that if equities continue to weaken, that the bonds will continue to do better, but that without the bid provided by flight-to-quality that the outlook for bonds will quickly deteriorate as the oversold condition is alleviated. In future posts I will provide a deeper dive into the shorter term technical and fundamental outlook for bonds, but the posts from January 2, 11, and February 9 should provide adequate background for now. Early in the year I published a five part market overview detailing my macro technical and fundamental views of the "Big 4" asset classes: Equities, Rates, Commodities and the Dollar. As part of that series I discussed the importance of the correlation between equities and bonds and the central role falling inflation played in creating the relationship. This inverse correlation is a historical anomaly, yet it drives much modern portfolio construction. The idea is that when equities decline sharply, flight to quality in bonds pushes rates lower (bond prices higher). In other words, gains in the bond portion of the portfolio partially hedge losses in the equity portfolio. Variations of the 60/40 portfolio construction (60% equities and 40% bonds) and risk parity strategies are intended to shield investors from the worst of equity declines and indeed have had an admirable track record of reducing return volatility. After decades of success, the amount of assets devoted to this strategy, both overt and passive, is staggeringly huge. If the historic positive correlation is reasserting itself due to a change in the trend of inflation (stocks down and bonds down), the subsequent unwind has the potential to create massive dislocation. In my view, the combination of extremely negative real rates (nominal rates less inflation), an inflation cycle that has turned from virtuous to vicious, and equity markets, that at least at the index level, are extremely overvalued, may be setting the stage for a polarity switch in which bond prices and equity prices fall and rise together. That has clearly been the case so far this year. Year-to-date (YTD) the bond composite has returned approximately -12% while the S&P has returned approximately -1%. In other words, both sides of 60/40 and risk parity portfolios have lost considerable value. If the year were to end now, it would be a historically bad year for the strategy. Is the switch in correlation a short term phenomenon or the start of something much larger? To my mind, this is the central question for the remainder of this year. I think the next few months will be telling. There is also the tension between high inflation and the growing odds of a significant recession. Not only does high inflation serve as an inhibiter to real economic growth, but so will the Federal Reserves (Fed) effort to return inflation to its long term trend. Paul Volcker had to create twin recessions to beat the great inflation. I doubt very much that this Fed will escape without having to make a similar choice. Notes: It is worth remembering that in an economy that is overly financialized and debt burdened, rising rates often break the weakest link in the economic chain. Weak links can be systemically important institutions, sectors or simply a dramatic sell off in the equity markets. That markets are currently in distress is clear. What isn't clear is that the distress is enough to create a systemic risk event. Bonds and equities frequently move into and out of positive and negative correlation in shorter time frames. When I talk about historical correlation I am referring to the very long term. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.

Education

by CMT_Association

Predictive Power of Bearish Chart Patterns This is a little, pseudo-study I did on SPY (SPX) analysing bearish chart patterns and whether or not there was a statistically significant relationship between bearish chart patterns and sell-offs and if so, to what degree? Most of the literature says that chart patterns and technical analysis are not useful and that chart patterns are the circumstances of randomness. Most research argues that you cannot dictate what a stock will do based on the candlestick charts and patterns, as these only offer retro-spective perspectives in the stock and are not able to be used prospectively. I, as someone with formal education in statistics and also as a full time trader, am torn between these analyses. On one hand, I can see where the researchers are coming from, on the other hand, I know it can’t be 100% true because many people are successful trading these strategies. While my personal strategy relies primarily on math, I would be lying if I said that I did not let chart patterns influence my decisions to some extent. Also, the majority of people conducting these studies are not themselves traders. I, as someone who published and familiar with conducting research studies, figured meh. Why not get it straight from the horses mouth and do this myself. So alas, here we go! I will present this as academically and rigorously as possible! Procedure: I looked at ONLY bearish chart patterns, particularly the patterns: head and shoulders, double top and triple tops. This was conducted ONLY using the 1 hour time frame, as the 5 minute time-frame would have been too labour intensive. Additionally, I had included bear flags in the bearish chart patterns, however bear flags usually accompanied head and shoulders and double tops, which were more visible first and thus, I ended up not having any cases of bear flags to include. The time frame was 1 hour and I included just over 2 years of data, from 2020 through till Friday. The data was collected using TradingView’s platform and analyzed using SPSS v25. Definition of Bearish Chart Pattern I was somewhat lax with my interpretation of double tops and head and shoulders; however, the major inclusion criteria is that they had to be clearly interpretable as the bearish chart pattern. If I had to look and analyze it in-depth with lines, etc., then it was not included. It did not need to be perfect, it could be lopsided, it just needed to be easily recognizable as the pattern. However, Heikin Ashi candles were used to easily identify the patterns and verified via line charts. Results Between January 2020 and April 2022, on the 1 hour time frame, there were a total of 24 clearly observable bearish chart patterns. The breakdown is as follows: Double Top: 12 incidents (50%) Head and Shoulders: 9 incidents (37.5%) Triple Top: 3 incidents (12.5%). The success rate of all patterns was 83.3%. The most successful chart pattern was a triple top. Of the three documented incidents, the success rate was 100%. The next was head and shoulders with a success rate of 89% (8 passes and 1 fail). The least successful pattern was the double top with a success rate of 75% (9 successes and 3 fails). The results, and this is the KEY point, WERE in fact statistically significant via analysis through T-Test with a P value of 0.001!!!!! This means that these results cannot be attributable to chance or randomness and in fact, have statistically significant meaning. Out of all the patterns, the average sell off that accompanied it was a drop of 10 points (standard deviation 11.27). Of the instances that failed, the average rise in price was 9.72 points (standard deviation of 4.66). Below is a list of the average point sell off by chart pattern when successful: Head and Shoulders: -12.33 (SD = 9.58) Double Top: -8.59 (SD = 14.03) Triple Top: -9.06 (SD = 5.56) Conclusion / Limitations: Please note, that this is far from what I would deem scholarly research. The problem with this type of research is trading is highly subjective and in the eyes of the beholder. So, what may be a double top to me, may not be to someone else. I tried to maintain some rigor by making sure that I only included extremely obvious patterns. That said, the time frame is still kind of small to draw sizeable conclusions. As well, my results contradict other, peer reviewed research. However, I have actually found some recent ish research that does support technical analysis and chart patterns. So I am not completely going against current research with this conclusion. And these results tend to support my personal experience trading these patterns. Also, it is important to understand that this analysis was done with SPY and SPY alone. Thus, I can’t say that these patterns will have the same result on other equities like TSLA, it would only be generalizable to SPY/SPX. However, I can say for certain based on this study that over the past 2 years and 3 and a half months, double top patterns, head and shoulders patterns and triple top patterns were correct 83.3% of the time. And that's it. Leave your questions/comments/critiques below! Thanks for reading!

Education

by Steversteves

The Anatomy of a Bear Market Recently, a lot of people have been talking about the possibility of a multi-year recession. I don't think that is a clear depiction of the current situation, but I am aware that the idea stems from a lack of understanding of bear market structures, and influence of market sentiment. So in this post, I'll be going over Ken Fishers' rules and conditions that must be met in order for a market to be clarified as a bear market, and how you can best position yourself to minimize downside risk. This is not financial advice. This is for educational purposes only. The Four Rules of a Bear Market - The first rule is the two percent rule: a bear market typically declines by about 2% per month. - Sometimes it declines by more than 2%, sometimes it’s less—but overall and on average, bear markets don’t often begin with the sharp, sudden drop some anticipate. - If a bear does drop by more than 2% per month, there’s often a market counter-rally that can provide better opportunities for investors to sell. - The three month rule: This rule advocates waiting three months after you suspect a peak has happened before calling a bear market. - Rather than trying to guess when a market top might come, this rule ensures one has passed before taking defensive investment action. - It provides a window of time to assess fundamental investment data, market action and possible bear market drivers. - I often see lots of people call market tops and bottoms, and time the market perfectly, but it needs to be clearly understood that this isn't the right approach to understanding the market. - Next, we have the the two-thirds / one-third rule. - About one-third of the stock market’s decline occurs in the first two-thirds of a bear’s duration, and about two-thirds of the decline occurs in the final one-third. - This was the case in the bear market caused by the financial crisis, as well as many other bear markets including that of 1973. - Combining this with the three month rule, it also implies that if you have identified that a market has indeed begun its bear run, you might be better off taking profits/losses on your position, managing risk by increasing your cash holdings, and buying back when capitulation has happened. - And finally, we have the 18-month rule. - While bull market durations vary considerably, statistics demonstrate that the average bear market duration, since 1946, has only been 16 months. - Very few in modern history last fully two years or longer. - If you’re engaging a defensive investment strategy, you probably shouldn’t bet on one lasting so long. - The longer a bear market runs, the more likely you’re waiting too long to re-invest. - If you remain bearish for longer than 18 months, you may miss out on the rocket-like market ride that is almost always the beginning of the next bull run. - Missing that can be very costly for investors. So are we currently in a bear market? - Based on the four rules above, there's a high probability that we are not in a bear market. - Since I've uploaded this post, the market has bounced swiftly off the 100 moving average on the weekly. - Just as the covid-induced drop of March 2020 turned out to be a 'buy the dip' opportunity, as opposed to the beginning of a bear market, the sharp correction we have seen since the beginning of this year goes against the first rule of the bear market. - It’s critical not to call a bear market falsely, and this is a huge mistake that a lot of people make. - If the market is just going through a correction (a short, sentiment-driven downturn of -10% to -20%), you’re better off riding through it and maintaining your portfolio. - It is impossible to accurately and consistently time market corrections because of the way they behave. - A correction can start for any reason or no reason. So if you believe that the economy is strong, and the fundamentals of the company you invest in remain solid, there's no need to sell off your holdings, especially when your actions are motivated by fear. Conclusion Bull market corrections are not fun, but it's important as an investor for you to be able to distinguish bear markets/recessions from bull market corrections. Choosing to undertake a bear market investment strategy and go defensive should be rare and shouldn’t be done by gut feel or by your neighbor’s opinion. Exiting the market is among the biggest investment risks you can take—if you’re wrong and you have a need for portfolio growth, missing bull market returns can be extremely costly. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)

Education

by Michael_Wang_Official

The ART of profit booking I am posting a chart for educational purpose using S&p 500 index with heikinAshi candle and elliott waves trading is an art of buying at low and selling at high, looks easy to do? if so why more people loosing and big players minting money? trading is a money making process when the crowd has extreme interest in one direction(buy /sell). when everyone in the street is buying, it is the RIGHT time to sell. The ART of profit booking without harming buyers(they don't know what's happening) is described in the chart. Because if they knew in advance then to whom the seller has to sell? Actually speaking the BULLS AT THE BEGINING OF THE TREND NOW BECOME BEARS! SELVAM BE, MBA option trader

Education

Updated

Complete Macro Analysis Hello everybody! This is a follow up on my 6-part traditional and crypto market analysis, yet everyone that reads this one will benefit greatly, regardless of whether they've read any of the previous analyses or not. Over the last week I provided some updates on each part, however it currently makes more sense for me to make a brand-new holistic analysis, rather than provide small updates on each part. This one will be focused entirely on traditional markets, while the next one will be focused entirely on crypto. In order for anyone to have a better idea of where markets might be headed next, it is best to start with the bond market. Bond yields have been rising across the world and across the entire curve, with the big distinction that lower duration bond yields have been rising significantly faster than long term ones. The main reason that this is happening is that bond markets are expecting Central banks to raise rates a few times in the next 1-2 years, but don't believe they can do anything more than that. Essentially the market sees inflation being transitory, that the global economy is in a bad shape and that Central banks are in such a terrible spot, that by the time they raise rates a few times, they will be forced to start cutting them again. Based on the charts below, it is clear that bond yields are still in a massive downtrend. The 10y yields have started hitting resistance, while yesterday we got the first rejection at resistance due to the Russia/Ukraine news. It is pretty normal for people to seek safety at times like this, by buying bonds (bond yields and bonds are inversely correlated). So, as you can see on the third chart, the minute bonds got to support and the news started coming out, the bond market bounced. Although I wish that war between Russia and Ukraine doesn't happen, and actually believe it won't happen, in case that it does happens, the Fed gets some room to not raise rates. For many reasons that I mentioned in the previous analysis, it is clear that inflation will come down significantly in 2022 and there is very little the Fed could do about it anyways. Therefore, any excuse they might be able to use to not raise, they will probably use it. Having said all that, bonds are still in a short to medium term bear market, and could fall another 5-10% before they put in a final bottom (yields going up by 0.5-1% from here). Now the situation between Russia and Ukraine doesn't affect markets just because it affects the psychology of people or because governments print money to cover expenses of war. There are several severe implications around trade and resources, as a lot of trade especially between Europe and Russia could stop, while Russia is a major exporter of commodities, primarily of Oil and Natural Gas. Europe and the entire world were already facing serious problems around energy, and this could make things even worse. Again, for many reasons mentioned in the previous analysis, there isn't enough oil above ground or oil production to cover the needs of the world at reasonable prices. OPEC isn't even able to meet its production increase goals, let alone be able to handle Russia not giving oil to the rest of the world. Oil is already pretty expensive relative to where it should be given the current state of the global economy, and based on the charts it could go significantly higher. So far, the market has behaved as I had expected, with a rise up to 92-93$, a pullback and now another push higher. It's not yet clear if the current situation will boost oil prices above 100$, but it is certainly possible. In the short term it is easy to see a mini 'speculative shock', that could send crude up to 115-120$, only for it to then come all the way down to 75$ and find support there. What is interesting to note is how Gold has been able to hold its ground for so long, despite bond yields going higher. Not only that, but it currently sits above all major moving averages and pivots, while it has also broken above its key diagonal resistance. The truth is that the breakout isn't as decisive as one might have expected based on the news that came out on Friday, hence it might be a trap. It’s clear that the breakout was heavily affected by the the Russia/Ukraine news and that could be the catalyst for a gold bull market, but it’s still prudent to be cautious. What is even more interesting is that Gold has gone up, while most Central banks are raising or plan to raise rates, and while the USD has been going up since early 2021. In my previous analysis, I mentioned how I thought gold going up or down is more like a coin toss, as there is a strong case to be made in either direction. Some people took that as me being bearish on Gold, while what I had said was that above 1930-1940 gold might be tremendous for going long. Personally I prefer to buy strength and simply sacrifice some gains, in order to avoid being stuck in a trade that doesn't do well. A few weeks ago, the ECB hadn't even talked about raising rates, but now they have. Right after the Fed meeting the EURUSD pair had a major reversal that accelerated when the ECB started turning hawkish. My initial thought was to watch Gold closely, as now 3 of the 5 major Central banks are raising or talking about raising rates, yet gold remains strong. At the moment EURUSD has been rejected at resistance with an SFP, yet it still has some room to the upside. It's above the 50 DMA and the diagonal, so if everything goes well and tensions get resolved peacefully, the pair could easily get to 1.15-1.17 by the next Fed meeting. The USD seems to already been losing steam as the yield curve is flattening and there are already 7 rate hikes being priced in. Hence the ‘real’ news isn’t that the Fed will raise rates by 0.25% in an emergency meeting or that it will raise rates by 0.5%, but that the ECB might raise rates after an entire decade, as well as that all Central banks will be forced to cut rates relatively soon. Therefore, this gold strength could also be an indication that many investors are betting on a policy error by Central banks, which might be forced to reverse course faster than people expect. What people need to know, is that gold doesn't behave like most people think it does. Gold in our age, is more like an error/catastrophe hedge, that tends to follow real rates. For example, today Gold could benefit from two things: 1. A war is definitely a big boost for gold, as people might want to own it because it is of limited supply and has no counterparty risk, and it can easily be owned anywhere. Countries that go to war tend to devalue their currency or even seize assets, or that country itself could be excluded from the global financial system, like being kicked out of the SWIFT system. In such a situation gold tends to offer tremendous certainty, while nothing else really does, not even US treasuries. 2. When Central banks are cornered or have no real control over a certain situation. Currently it is obvious that Central banks are trapped, and that there is another major 'catastrophe' lying ahead. The world is stuck in an environment of low growth and too much debt, with markets being significantly overleveraged. None of the problems over the last 20-30 years have been solved, only papered over, hoping that the system magically heals, with the last 13 years alone being full of examples of them always acting late. Finally, the key reasons why gold hasn't done well during a situation of deeply negative interest rates, is that 1. Gold had rallied significantly since 2018, 2. There were lots of different, more compelling opportunities out there, 3. Everyone was already prepared (nobody else to buy + people had to sell gold as inflation increased to covered other costs, essentially using their insurance), 4. Most of the inflation wasn't caused by the Fed / Central bank actions. After having gone through all of the above, it is definitely time to talk about stocks. Once again I’ll focus on the top 3 US indices, SPX, NDX and RUT, as they can give us a pretty good idea of where stocks are headed globally. In my previous analysis I mentioned how I expected a bounce, a dip and then another bounce, which all pretty much played out based on my technical analysis, with one exception. The last move up was shorter than initially expected, however even based on my tools I was probably 'too optimistic'. Starting with the S&P 500, we can see how the bullish channel was broken and significant downside followed. Then the market had a strong bounce off the 300 DMA + horizontal support. After the bounce it got rejected on the 100 DMA + diagonal resistance + horizontal resistance, and fell down to the 200 DMA where it bounced. What is odd to me is that the bounce ended with a double top, rather than getting up to the 50 DMA and test the diagonal, while forming an SFP. A double top there is somewhat bullish in the short term, as it is an area that the market will probably break before making new lows. At the moment the market is sitting right at the Yearly Pivot but has broken below the 200 DMA, a situation that is neither very bullish or bearish. As a whole the momentum is indeed pointing lower and this isn't a great picture. In turn the Nasdaq 100 is actually looking much worse than the S&P 500, as a lot of the big tech behemoths have been taking several big hits recently. Slow growth, higher inflation and higher interest rates, are definitely not beneficial for these companies. For example, we saw a massive gap down for Facebook after a disappointing earnings report, a gap similar to what happened in June 2018, with the NDX going down 19% from that point in the next 6 months. Tech stocks have massively outperformed everything else since 2009, and pretty much everything compared to where they were in Feb 2020, so it is normal to get some extra weakness in this index. At the same time several parts of the stock market started peaking throughout 2021, with mid Feb 2021 being a major inflection point. At that time many unprofitable tech related companies had reached bubble territory and started reversing, but the effects of their valuation getting crushed started having an impact on NDX three months ago. The third index and final index is the Russell 2000, which looks like it was in distribution for about 10 months, while a few days ago it had a throw back into resistance. The RUT had a really strong breakout in Nov 2020 and by March 2021 it was up 35%. Then in September it formed a clear bull trap that led to the major leg down. Once the 2100 support that was tested multiple times for about a year was broken, it became clear that more downside would soon follow. At the time of my previous analysis, I mentioned that we'd probably see the Russell retest that support and flip it into resistance, which happened as expected. Now the index is below all major moving averages and Pivots, and is still looking bearish, even though in the short term it has shown a decent amount of strength. Until it reclaims 2250, it remains in bearish territory and it is probably best to avoid going long, Based on all the above, things overall aren't looking great. At least not in the short to medium term, for the economy and the stock market. Central banks are trapped and most investors are aware of that, and now there is an extra variable, that of the conflict. So the question then becomes, if everyone is aware of all of this, couldn't the market simply go up from here? Aren't lots of these things priced in? Aren't wars said to be good for the stock market? Well, like I mentioned above all of these are correct. It is true that due to the conflict we might see bond yields roll over and we get more stimulus from central banks and governments, both of which could push stocks higher. However, in the short term there is a lot of uncertainty due to the way many things will get disrupted in the world. Because of that gold and oil could go ballistic, hence they are the best bets at the moment. It is probably best to stay away from stocks for now, as their potential downside is substantial, while their potential upside is limited as they need some time to recover. Nothing in the charts really suggest that they are ready to go up hard any time soon. Let's also not forget that stocks would have eventually deflated to an extend, regardless of what the Fed or what happens in the world, as the 2020-2021 frenzy couldn't last forever. Of course this doesn't mean that I believe a major bear market is in play right now, just that the SPX could eventually get to 3900-4000 in the next year, that the NDX will test its major log diagonal and that the RUT will its 2018 highs. Although I don't know how or when we get there, to me the most likely scenario is that within the next 2 years bond yields will collapse and the government will be forced to spend a lot, while the Fed is forced to cut rates and do QE. Even if the yields don't collapse and inflation goes rampant, the US government will still be forced to print and spend a lot, something that would make the problems worse. In conclusion, despite the fact that I was mostly bullish on stocks and oil through 2020-2021 and neutral-bearish on gold, my stance now remains bullish on oil (buying dips anywhere from 55-75$), neutral-bullish on gold and neutral-bearish on stocks. For me to turn bullish on stocks again, I'd either need to see certain levels get to the downside or reclaim certain levels to the upside, or some extreme action by central banks or governments. In terms of US bonds and the US Dollar, the picture is not as clear. In early 2021 I was bearish on bonds, but after that I was bullish as I didn't really expect the Fed to raise rates and thought bonds were significantly oversold. Even if I wasn't expecting the Fed to raise rates, the USD was also extremely oversold and none of the issues of the financial system had been solved. The world was still short on dollars, what the Fed and the government did was too little and at the same time everyone printed. In the current environment, on the one hand bonds are in major downtrend and the USD is in a major uptrend, and on the other hand both might have reversed after hitting major inflection points. Hence it is probably better to either go with the trend or simply wait a bit until the market gives us a clearer picture as to where it wants to go next. Thanks a lot for reading and good luck with your trading! :)

Education

by BitcoinMacro

Using different deflactors on Indexes Here I put up a series of deflactors on the Nasdaq 100 Total Return... I like to use Total Return Indexes becuase they acurately reflect the actual growth of the invested money, rather than simple price indexes... I picked the Nasdaq because as you may have noticed from previous posts the Nasdaq is the absolute winner in terms of performance in the last 15 years... also (unfortunately) I did not find a Total Return option for the S&P500 on Tradingview... actually it's quite bad out there, even spglobal.com doesn't seem to publish those anymore, much less deflated with CPI... Anyway, moving to the chart here we present a series of deflactors applied to the $NDX Total Return since INCEPTION: 1. Gold 2. CPI 3. CPI+DXY 4. M2 (Fred money stock) 5. REAL M2 (Fred money stock with CPI) I found the Real M2 the most interesting idea, for in a high monetary inflation environment, Real M2, purges the nominal M2 (total monetary inflation) of its price inflation "component", and comes to a somehwat more balanced deflaction than the original metric (435% performance using M2 Real, vs 275% using the Pure M2 deflactor)

Education

by LotusTrading20

Updated

Big Four Macro Overview: Part 5 For more detail please refer to the first four pieces in the series (linked below) and the accompanying charts. Markets entered 2022 with well established trends and trading ranges, but I believe that the coming year holds significant potential for change. This is particularly true in the equity and treasury markets. Because much of the outlook hinges on inflation (see below) it will be particularly important to monitor inflation related markets. Importantly, while it's easy to make the case that rates should rise significantly this year, modern financial history suggests that rising rates are likely to break the most vulnerable financial link. If that link has the ability to create systemic disruption, rates will fall again, even if inflation is high, as the market runs to the quality of treasuries. In my opinion, the most important trend of the last four decades has been the decline and subsequent quiescence in the inflation rate. Falling and low inflation allowed Treasury rates to decline. Falling Treasury rates supported equity valuations and home prices. They also enabled the wholesale financialization of the economy and allowed both public and private entities to add leverage without consequence. Importantly low and steady inflation also created the negative correlation between treasury and equity. Without that correlation 60/40 and risk parity strategies may well be in danger. Inflation: My working thesis has been that many of the trends that supported disinflation have reversed and that rising inflation will act as a headwind to investment for the next decade. Going into 2020 I believed that the stage for higher inflation had already been set and that higher inflation would result in higher rates and ultimately equities. Consider that in early 2020: • The output gap had closed for the first time since the Great Financial Crisis. • The economy had just reached full employment with a U-3 Unemployment rate @ 3.5%. • Wages as measured by the Employment Cost Index were rising @ +4.4% YOY rate. • The Cleveland Fed Median CPI had recently set a 10 year high. If not for the pandemic, by early 2021. the Federal Reserve would have been forced to respond to rising inflation by increasing rates. Instead, Covid crushed the demand side of the economy, derailing the growing inflation. Now the extreme fiscal and monetary response combined with disruptions in logistics and labor have combined to create very high inflation. While I think that many of the issues creating this burst of inflation are moderating, the same set of factors that were reversing in 2020 are still in place. In short, I believe that the broader trend has changed and that when everything settles out, will end up significantly in excess of the Feds 2% average target. Bottom Line: Above trend growth in inflation and monetary/fiscal tightening suggest higher volatility and a significant chance that many of the trends that have defined the last few decades will falter. My sense of the economy is that the best growth has already occurred as the result of historically supportive fiscal and monetary policies and now both paths are turning restrictive (see the second part of this series for a more in depth discussion) and markets will likely reflect that reality. Rates: • Bonds remain in a bull market defined by a broad declining channel, but rising inflation could easily change the trend. The most likely catalyst to end keep rates below 3.25% would be a financial accident created by higher rates. Equities: • SPX remains in a technical bull market and there are no overtly bearish behaviors evident in the longest perspectives. However short term weakness can easily morph into a bear market. Commodities: • Goldman Sachs Commodities index is in the center of a broad 14 year range, bounded essentially by the low set during the financial crisis and the resultant 2011 high. range. The most notable/useful current chart feature is the clear uptrend from the 2020 pandemic low. Until that uptrend is broken, the most immediate trend is to higher prices. US Dollar: • The wide macro range, 70.70 - 121.02 has contained price action over most of my trading career but volatility is more cyclical than price. These periods of low vol. set up conditions that often lead to explosive moves. Now, back to the charts! Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.

Education

by CMT_Association

The Investor Mentality: Are You a Worthy Investor?There are two types of people: people who will read through this entire post and put themselves on a life-changing path towards generational wealth by understanding the essence of investing, and people who simply won't read this post. This post may be lengthy and abstract, but I guarantee you that comprehending the concept of what it means to invest, and how to do so, can change your life forever. This is not financial advice. This is for educational purposes only. Capitalism is much simpler than you think. The goal of the game, as the name suggests, is accumulating as much capital as possible. Interestingly enough, there are only three ways to achieve this goal, and if anyone tells you otherwise, they're either lying or they're a crook. The method is simple - you need to own the three means of production: land, labor, and capital. Land: Only 30% of earth's surface is covered by land. Land, contrary to common belief, is rare in the sense that it's limited. If you own land, you can have factories and houses built on your land, through which you can receive rent. This was also prevalent in the past where aristocrats allowed peasants to farm on their properties, taking a certain percentage of the crops that were harvested without even breaking a sweat. Labor: When you own labor as a means of production, it essentially means that you run a business. What this implies might not be intuitive, but it simply means that you're paying money to buy someone's time. Time is a resource that is much more important than money. Money is infinite, and can even be printed. As for time, both Jeff Bezos and a freshman at college both get 24 hours a day. The difference between the two, is that Jeff Bezos can pay the freshman and hire him to work on whatever needs to be done. Essentially, Jeff is paying to buy the freshman's time, a limited resource. Capital: Capital is the magic sauce that allows all of this to happen. You can buy land, buy someone else's time, and even buy companies that do all of the above on your behalf. But, capital is no good if you don't make that capital work for you. You can lend capital to someone who needs it, and receive interest payments. In this case, interest is simply understood if you think about it as the cost of borrowing money. The name of the game is to either make the capital work for you, or convert that capital to other means of production, which then bring you more capital, ultimately creating a virtuous cycle. When people invest in stocks, oftentimes they get too caught up and focus only on the price action, and forget the fact that buying a stock represents ownership of the company. In other words, if you own 10% of Tesla's shares, you have ownership of 10% of the company whether the company is valued at $800B or $2T. So what do you do when a company that's supposed to be worth $1T, judging by the amount of money it makes (cash flow) and the growth it's showing, drops to $800B? The most logical course of action is to buy more shares. You want to buy more ownership of the company for a cheap price, because you know that the company is going to buy other people's time (labor) and use that to generate more capital for you. It seems so easy, but there's a reason why most people fail at investing. Our brains are biologically wired to focus on short term consequences, and we fail to look at what's best for us in the long term. Thus, we make dumb mistakes like selling perfectly good assets just because "the price dropped too much". "A price drop is an opportunity to buy more of a good prospect at cheaper prices." - Peter Lynch Unfortunately, most people sell when the price drops, because fear, uncertainty, and doubt take over their mind. There is a reason why billionaire hedge fund manager Bill Ackman bought over $1.1B worth of Netflix stocks when the price dropped. He saw no fundamental changes to the company, yet the price dropped due to certain people's irrational decision to sell. And I'm very positive that there's a high chance that Bill will be the last one laughing in the end. I believe that there are only three reasons for you to sell a perfectly good asset: 1) when the narrative has changed (fundamental change in the asset), 2) when you find a better asset, and 3) when selling is inevitable to save your entire position (ex. selling to pay taxes). Unless there is a clear reason for you to sell that fits into one of these three criteria, selling is probably not the best idea. If you truly understand what it means to invest, and convince yourself on why you should be buying or selling at certain levels, you can, and will become a successful investor. Think big, be optimistic, and have patience. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)

Education

by Michael_Wang_Official

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