Market Is In An Uptrend And Trends Tend To Persist

One strategist I read regularly and who prepares weekly technical commentary, Charles Kirk at The Kirk Report, had a reference in this week's report relative to the strength of the current market. Kirk highlighted the below quote from James DePorre,

"If you simply focus on what the pricing action is saying, then your job of profitably navigating the market becomes a lot less complex. The simple fact is that we are in a very long-term uptrend, and trends tend to persist. The media might have all sorts of headlines to create their narrative, but all we really need to know is that the odds favor the bulls in an uptrend and vice versa. At some point, that pattern (and trend) will change, but trying to predict it ahead of time is a hard way to make a living."

The quote is certainly applicable in the equity market environment investors are currently experiencing as corrections and pullbacks seem to be nearly few and far between. I noted this lack of volatility in a post late last week, The Risk Of De-Risking The Equity Portfolio. And as it relates to trends, over the long term, the market trend is one that moves higher as can be seen in the below chart. An important observation from the below chart is the fact the line mapping the current market advance falls between long term support (green line) and resistance (red line.) So one might say the market is neither oversold or overbought from a technical perspective when only evaluating the below chart.

Evaluating the long term is relevant and appropriate, but as famed economist John Maynard Keynes once noted, "In the long run we are all dead." So evaluating the shorter term market picture is important too.

Charles Kirk included the below chart with the quote he shared from James DePorre. The weekly two and a half year chart represents the New York Stock Exchange Composite Index. The index closed Friday at 12,080 and the technical chart pattern indicates a target price of 12,869. This target price represents a 6.5% advance from Friday's close. Obvious from the chart's pattern, if this return is realized, a move higher is highly unlikely to occur in a straight line. Kirk's commentary included with this chart noted,

1 2
View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.