I noticed a popular chart pattern in the S&P 500 this week while reviewing the portfolio positions and looking for new opportunities. I got really curious to see if others noticed the pattern. So, I searched around and started reading different commentary about the S&P 500. I’ll tell you, my head started to spin. What I quickly noticed is the energy in which the people commenting would defend their position! Here’s the deal…let’s take two people with two different opinions about the stock market…one thinks it’s going to go up, the other thinks it’s going to go down. Which one is right?
The answer? Both and Neither. So, how can that be? The overall reason is that people’s judgement is coming from different plans (or lack thereof). Breaking it down a little further, I’m going to give you the top three reason’s to NEVER take someone else’s opinion about the market to heart before doing your research.
The first reason is this…different time-frames. You don’t know if the person is day-trading or buying to hold on for the next three decades. That could make a big difference!
The second reason is how to manage the position. You want to know, when will I be wrong? Will I use a stop loss? When will I be wrong? How should I adjust the stop? Do I have a price target? These are all very important considerations before making a transaction.
The third reason is psychology. The bottom line is that people behave differently in different investment situations. To be truly fulfilled when it comes to investing, you must find a strategy that fits your personality so that you can stay with it over time.
The bottom line? There are many ways to skin the cat and none are necessarily better than the others!
OK, back to the current status of the market! If you want to know the pattern…click and I’ll walk you through it in the video.
With regards to the price action this week, the S&P 500 finished down 1.61%. It’s not all bad for the bulls though, the bears could not hold the S&P 500 on the weekly lows and we actually got a half-way decent buy trigger on a daily chart. Remember, the markets turn from the inside out…for example…the trend changes on the daily frame before the weekly and the weekly before the monthly.
We don’t have any new purchase plans for this week. The buy trigger must happen on the weekly frame before we take action. The buy signals that could possibly trigger this week are in securities in which the overall weekly trend is down, so I don’t feel good about getting involved. Have a great week as it should be an interesting one into Turkey Day! Happy Thanksgiving my friends!!
Adam Straseske, CMT