Chart of the Day
Markets normally move in alternating waves of with-trend impulse moves interspersed with lower volatility pullbacks. This is a reliable trend pattern, and, in fact, is enough to base a trading plan on. Typically, a market will make a sharp move in one direction, will consolidate somewhere near the extreme of
Technical Patterns
I post a lot of critical thoughts, and spend a lot of time encouraging people to think deeply about the technical tools they use. Recently, I've received a lot of questions about what I think actually works. Though I've answered this in some depth before (and
Market Math
Continuing from my previous post on moving averages, let's take a look at using a moving average as a trend indicator. Again, here is some material from the unpublished part of my book, on using the slope of a moving average as a trend indicator, and a look
Market Math
Ok, so I'll warn you up front: this one's going to be a little bit difficult. The response to my post on the 200 day moving average in the DJIA and the S&P 500 was very positive, and I received many thought-provoking questions and
Chart of the Day
I thought this was a good time to take a look at current market conditions in US stocks. This is certainly a time when risk, emotions, and volatility are elevated, but it is also a market that is still within "normal parameters". Probabilities favor a snapback, but there
General Comments
This is one of those technical questions that does not have a quick, simple answer. The best answer is "no, not really, and almost certainly not in the way most people think", but there are some nuances to consider. I have done extensive quantitative work on moving averages,
Psychology
Everyone does it. I used to do it too, but I stopped because I realized I looked silly a few months down the road. You've heard the predictions: "if this level breaks, it's game over", "if the 200 day breaks, it's
General Comments
This is the time of year when we typically start hearing seasonal predictions for the stock market. There are a few problems with seasonality, the biggest of which is that market data is highly random, and analytical tools will tease seasonal tendencies out of randomness. Until you develop some intuition
Relative Strength
The chart above shows the 12 month return (vertical axis) against the shorter-term momentum (horizontal), for the major sectors of the S&P 1500. We can clearly see that the only two sectors showing any remaining positive momentum are the defensive Utilities and Staples, as investors have retreated from
Individual Traders
The open, in many ways, is the most important price of the day; action off the open can often define the character of the entire session and even have implications for following days. Even if you are a longer-term trader, there are elements of short term price behavior you should
General Comments
Everyone is talking about the recent underperformance of small caps (and I've talked about it too!) This underperformance is taken to be a sign of an impending crash, or at least a sign that the market cannot rally. This might be a mistake, as a look at some
General Comments
The most important factor setting up pullback trades, and a simple framework for market and trend analysis that really works.