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When Trends Emerge... Embrace Them!The price of any asset is always the correct price because it is the level where buyers and sellers meet in a transparent environment, the marketplace. A price trend is the most accurate reflection of the market’s sentiment. When buyers are more aggressive, prices rise, and when sellers overwhelm buyers, prices decline. The stock market trend reversed The S&P 500 is the leading stock market index The trend bent Ride the wave until the technical position changes Never try to pick a top or bottom; the market’s sentiment will tell you all you need to know In his 2004 book, The Wisdom of Crowds, author James Surowiecki used case studies to prove that “the many are smarter than the few, and how collective wisdom shapes business, economies, societies, and nations.” A price trend embodies Surowiecki’s work, and that is why the trend is always a trader or investor’s best friend. When I first began my trading career in the early 1980s, my mentors taught me never to “fight the tape.” They were old-school traders who learned their craft in the days when stock prices were printed on a ticker tape. Fighting the tape is going against the trend. When the path of least resistance of a market changes from bullish to bearish or vice versa, it is a signal to take profits, losses, and reverse a risk position. The most successful trend-following traders and investors ride trends until they bend, aiming to take the most significant percentage of profits from a bullish or bearish price pattern. There can be plenty of false signals that lead to choppy results but catching a significant trend and riding it like a surfer rides a wave can be gratifying and highly profitable. The recent price action in the US stock market points to a significant trend change from bullish to bearish. The stock market trend reversed After reaching a record high of 4,808.25 on January 4, the March E-Mini S&P 500 futures contract ran out of upside steam, reversed, and has made lower highs and lower lows. The chart highlights the decline to the most recent low of 4,212.75 on January 24, a 12.4% decline in only twenty days. The futures contract was around the 4,420 level at the end of last week, closer to the recent low than the early January high. The Fed’s more hawkish approach to monetary policy has weighed on the stock market as stocks compete with bonds for capital. Moreover, the geopolitical landscape has likely caused selling as tensions between the US and Russia have risen to a post-Cold War high. The S&P 500 is the leading stock market index The S&P 500 is the most diversified stock market indicator and the bellwether for monitoring the overall equities asset class. While the recent selloff may appear as another speed bump, a close below the 4,495.12 level on January 31 would put in a bearish key reversal trading pattern on the monthly S&P 500 chart. A bearish reversal in Bitcoin and Ethereum on November 10 led to a price implosion in the cryptocurrency arena that took prices over 50% lower at the most recent lows last week. The S&P 500 closed more than 60 points below the critical level on January 28. The trend bent Trends reflect market sentiment. As we move into 2022’s second month, the stock market looks more than shaky. Higher interest rates, geopolitical problems, COVID-19 variants, rising inflation, supply chain bottlenecks, the potential for rising US corporate and individual tax rates, and other issues have caused selling to emerge in the equities market. There have been plenty of false signals in the stock market over the years. However, when corrections occur, they can be brutal. The last substantial correction took the S&P 500 from 3,393.52 in February 2020 to a low of 2,191.86 in March 2020 as the worldwide pandemic gripped markets. The 35.4% drop from one month to the next was a reminder that when the trend bends, it is best to follow the sentiment. The cost of trend-following is choppy results when markets display false breakdowns or recoveries. When trends emerge, the profits can more than compensate for short-term losses. The bullish trend in the US stock market bent in early 2022 and is now bearish at the end of January. Ride the wave until the technical position changes Trend-following is like surfing. It can take a long time to paddle around through small waves until a substantial one appears on the scene. Surfers look to ride the wave when it arrives. The S&P 500 has already dropped by over 12% in January, and a bearish reversal at the end of January could cause even more follow-through selling. Daily price volatility has increased, and rallies during a bearish trend can be particularly nasty for those holding short risk positions; thus, the term “rip your face off rally.” The critical factor in trend following is to begin riding the wave early so that you can stomach the ups and downs that naturally occur as the market gyrates between higher and lower prices on an intra-day and even intra-week basis. Those gyrations can cause the emotional impulses that cause many traders and investors to lose money or minimize profits. For trend-followers with the fortitude to suppress emotions, riding the bullish or bearish wave until it changes direction is the formula that separates winners from losers over time. Never try to pick a top or bottom; the market’s sentiment will tell you all you need to know Our emotions want us to be correct, and the emotional impulses are more concerned with calling a direction than profiting from the market. It is virtually impossible to call bottoms or tops in markets consistently, and successful trend-followers tend to be long at the top and short at the bottom. While this may seem counter-intuitive, it is the critical factor for profitability. Sentiment is a powerful force that often ignores news, expert fundamental analysis, and all other noise that surrounds markets each day. Sentiment creates price trends that indicate the path of least resistance of prices. Picking tops or bottoms denies physics that teaches a body in motion tends to stay in motion. In finance, the trend is your friend until it bends is the same construct. As of the end of last week, the trend in the stock market was bearish, and we will ride the wave until the market sentiment tells us it is time to ride another in the opposite direction. We are constantly long or short the highly liquid markets we trade, and we may get chopped up when sentiment is confused and provides false signals. However, we are always positioned to participate when the big moves come. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
SP:SPXShort
by Andy_Hecht
1
Bargain hunters go shopping into tech and support US IndexesMorning Jumpstart Macro View and US market recap 31-01-22 US ended the week with a bang as bargain hunters went shopping to support the broader US market. Tech was again the favoured stocks which lifted the SP500 while the DOW lagged the enthusiasm. There may be some end of month window dressing on the cards also which may have provided some support. For a deeper look at the price action, key levels and what I see playing out...watch the video and feel free to leave any comments. View more at www.tradethestructure.com
CBOT:ZB1!
by TradeTheStructure
2
Mid Feb. Bitcoin to hit $30,000. Buy or sell?Just a quick video breakdown. As you can see a trend building here over the last few weeks, it's likely that trend will continue to true support. That level is very clear at $30k and looks to be pretty heavy support. It is possible we enter the winter and head into that $20k rang or possible a collapse tot he $12k range over a period of many months of volatility. Of course, at that point it's time to back up the truck. A lot of political items going on right now as well so keep these in mind as they may trigger a sell off that goes beyond technicals. I have buy orders set on other crypto in their support zones to prepare for overnight sell offs as an opportunity to catch a clearance sell.
Long
by DefyingFinance
What's next on Bitcoin?Do you need some intuition for BTC? This is my map! Fear and Greed index shows 13 (Extreme Fear), where previous week it was 23. The 28k-29k is a great support, yet we could go to 25k as well. I consider it the next strong support. There are two big bearish patterns, a Head and shoulders and a huge double top pattern. Yet I consider the deeps with green boxes, which are higher than the patterns' target. What is going to do is wait for some time and perhaps Buy (Long) on these supports. I Feel there would be a larger Volume (Sell off or Buys) which will indicate the next move, So just wait for it.
by DarkRez
3
AUROBINDO PHARMA - Price Action Analysis Considering last week candle, NSE:AUROPHARMA has already given confirmation of further sign of selling . Price has created harmonic Shark pattern with PRZ level 0.886 and 1.13 with price 651.70 and 548.75 respectively. As we have witnessed of bounce from 0.886 level but not sustained above 200 MA. Two things are possible here : 1. It again takes confirmation support nearest to 0.886 level and shows bullish reversal candle with high volume. 2. Or can see further sell off up to 1.13% level at price 548.75. BUY: if price sustains above both PRZ level can gives further upside opportunity. SELL : below 650 price, you can sell if its break or you can do every rise sell with strict SL.
NSE:AUROPHARMAShort
by vraj8597
Time to Go Long?Maybe. On higher timeframe, still looks bearish, a Bounce is likely from the 21 MA IMO. See the 'h' pattern? Primary and Secondary sells. Indecision and consolidation followed. Would not get real Bullish just yet, although it sure suggests we could see higher next week. These indicators are by no means foolproof, but they do help you to not make expensive mistakes; so, closing shorts might be wise here, even if it's too soon to go long. Not investing advice; trade at your own risk, GLTA!
TVC:SPXLong
by DaddySawbucks
7