Most Short-Term Indicators Positive
The short-term trend remains pointed upwards.
With the PMO at the top of its range, it means that I'm watching for signs of the next downturn. However, most of the short-term indicators are positive, so for now the strategy is to continue to hold the leading stocks and ETFs.
A couple of the important indexes have completed rallies up to the levels where they broke down in the late-February, early-March period.
This is the chart that has been in focus for many people this past week. The resistance level is definitely an important obstacle, so a break above would be a big win for the bulls. However, the bears would point out that the bulls would still be faced with getting past all the overhead supply. A possible outcome is that this index moves back into its sideways, choppy pattern similar to most of 2019.
The XLK Tech ETF has rallied straight up to the top of the gap where it originally broke down. Even tech stocks have to take a breath at some point, so maybe this ETF forms a handle here before breaking to new highs.
I took partial profits during this rally way too early. I came to my senses and redeployed the cash a couple weeks ago, but now I'm watching for signs to take partial profits again.
The market has been confusing as it rotates from growth to value, and then back from value to growth. To help me handle this rotation, I decided to start using the daily parabolic-SAR to help me determine which stocks to trim. I haven't sold any stocks completely, just a percentage of the positions. If the indicators remain healthy, I'll take some of the proceeds and add to the stocks that are hitting both new price highs and also new relative strength highs.
The Longer-Term Outlook
The 3050-level of the SPX is the top of the range in the mid-2019 corrective period.
Do we need to go back and re-evaluate the COVID-related market selloff? Is it possible that the larger uptrend is still intact, and that this year's selling is part of a corrective pattern that started with the selling in early 2018?
The SPX has formed a huge megaphone pattern. Bullish or bearish? I don't know.
More later.
Outlook Summary
I do my best trading when I am patient and disciplined.
The medium-term trend is lower as of Feb. 26.
The short-term trend is up as of March 24.
The economy is in recession as of March 28.
Contrarian Sentiment favors lower prices as of May 2.
The medium-term trend for Treasury bonds is up as of Jan. 25 (prices higher, yields lower).
Strategy During a Bull Market
- Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
- Buy small-cap growth-stocks on breaks to new highs in the early stages of market trends
- Reduce buying when the market trend is at the top of the range
- Take partial profits when the market uptrend starts to struggle at the highs
Trader Discipline
- Never invest based on personal politics
- Take pride in sticking to the trading plan
- Don't give in to fear, greed or anger
Disclaimer: I am not a registered investment adviser. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...
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