I appreciate the various long-term and short-term charts, but I have found focusing on a daily chart for trends of the past 3-10 days is the most productive. You can catch many swings while waiting for long trends to confirm. For instance my IWM trendline was broken with a bullish move up on Wed and confirmed at open Thurs.
In addition, the "too far, too fast" is more of a cautionary guideline, not a reason to sell or short and not a reason to enter UVXY. Simply wait for a pull back and look for the uptrend to break. It could be like 2021 and go on for a year. Don't guess or predict. React to trendlines.
I have backtested years of IWM and QQQ to prove simple trendlines can have CAGR of 70-110%. It simply means buying a break of a downtrend then selling a break of an uptrend. In addition, always sell for a loss of maximum 1% if it moves against you. The key is being out for 80% of the drops, and being 3X leveraged for 60% of the gains.
I appreciate your thoughts and agree. I'm currently still pondering a strategy for this coming week. You're not holding TNA, are you? Likewise, I'm not holding SOXL or LABU, and I'm wondering whether I should look to buy based on the early morning action, or simply wait for a pullback. Doing nothing is very appealing.
I looked at the weekly chart for SPX to see if last week's 'power move' was really that extreme, as I was feeling it was and the Zweig Thrust suggested it was. The week of March 14, 2022 was +7.30% from the Monday low (a continuation of the prior week's drop) to Friday's high and it continued up moderately for 2 weeks then fell. This past week could very easily turn out the same, as the first hard reversal from the July peak. I'll post the chart in a new update.
The week of May 23, 2022 was +7.32% from the low on Tuesday (which was higher than Friday's spike low. Clearly, this past week's +5.82% move from Monday's low (and +6.58% from Friday's low to high on Fri. Nov. 3) was not exceptional and there's a good chance the overall drop will continue. The move by IWM and XBI were more exceptional and they both have a longer road to recent highs. XBI is looking a lot like June 2022 (or it might turn out like May), so I may put my focus there. It's a devil I know, at least.
I completely agree, the "too far, too fast" is more of a cautionary guideline, and not a reason to sell or short and not a reason to enter UVXY. It's a bit like driving on the highway and in a long, steep climb. You know it's not going to continue forever, but you don't take your foot off the gas till you have cleared the top and accelerating past the speed limit. And there's no reason to assume you should be ready to hit the brakes suddenly either.
Not holding anything but cash. I'm going to buy UVXY on any gap down as I believe another gap up in the market is a trap and worth the gamble. I'm also looking for UVXY to crossover 20 hr MA.
SPX broke down to 4103 last week, so maybe a little lower. There "should" be a bounce for a week or two, but why guess? Wait and see if the downtrend gets broken and jump on for a ride. Then stay on until the trend support breaks. Avi may be wrong about 2022 lows.
This week might provide a sharp turn on Wednesday with the FOMC, and maybe some whiplash on Thursday and Friday. Also, SPX is useful as a guide and VIX is closely tied to it, whereas for a long trade, the better pick is generally QQQ versus SPY, and QQQ made a higher low on Friday from Thursday's low of 342.45. Friday's low was 344.13. If Monday holds above that, or in that range and holds, I'd buy with a stop sell at 342 if I was watching closely and able to catch a reversal if stopped out, or 341 or 340 if I wanted to give it some room and willing to take a 1% loss. The 1 hour and 30 minute charts should keep you on track.
Thanks for the update. Not to take anything away from Avi, but his resistance and support are nearly identical to the simple trend line resistance and support you drew on the SPY chart yourself. I am always looking for easier ways to make decisions.
Interesting point about 29% between weekly and monthly support. Unlikely we see any direct moves up or down, but instead choppy rallies and waves. The best time to short was the day after the rejection at 4380.
I also have heard examples of 10-15 year stretches of the market trading in a large range. Anyone holding makes no gains, but following trends you make 200%. Example just the last 24 months SPY is even. Similar to 1934-1949, 1956-1976, 1997-2011, etc. for Dow Jones. Buy and hold is usually a BAD strategy.
Totally agree, the simple trendlines that anyone can draw on their own have been very, very useful. Also agree that there won't be any direct moves, but 29% down to monthly support was eye opening for me.
SPX hit 4385 on Oct. 10, held the next day and fell hard the next two, which I thought was healthy. It gapped higher on Monday, rallied and held 4380 all day. For me, that move was suspicious. Gapping lower on Tuesday and powering up to 4393 was also suspect and I was watching for a reversal that came at 12:30. Unfortunately, I was only suspicious of the moves and didn't have conviction that a drop would ensue. If you were referring to Oct. 18 as the best day to short, then I would agree if you weren't already short from the high reversal the day before.
I also agree that buy and hold makes no sense nowadays. I wrote a short story the other day about 3 farmers who invested in TD bank in 1980. (That's how far back my charts go.) Two farmers bought shares and the third borrowed money to buy more land and equipment. Obviously farmer number 3 did the best financially. One farmer just held his shares and the other simply watched his stocks like he watched his milk cows and discovered took action a few times when shares seemed over valued. From the story: By the fall of 1989, it was getting erratic again with the price way up to 5.78 and then back down near $5. He thought to himself, "If I could get $5 on some of these old cows that I bought for $2 and have been milking for 5 years, I'd take it." So, he again went to his TD bank and talked with his advisor."
Back then he had to make a trip to town to meet with his financial advisor, so buy and hold, in general, made sense. Up until 10 years ago, it was still difficult for people to have control of their investments. Now, with a trading app on your phone, there's no excuse for not taking control and discovering that buy and hold is actually a BAD strategy.
I appreciate the various long-term and short-term charts, but I have found focusing on a daily chart for trends of the past 3-10 days is the most productive. You can catch many swings while waiting for long trends to confirm. For instance my IWM trendline was broken with a bullish move up on Wed and confirmed at open Thurs.
In addition, the "too far, too fast" is more of a cautionary guideline, not a reason to sell or short and not a reason to enter UVXY. Simply wait for a pull back and look for the uptrend to break. It could be like 2021 and go on for a year. Don't guess or predict. React to trendlines.
I have backtested years of IWM and QQQ to prove simple trendlines can have CAGR of 70-110%. It simply means buying a break of a downtrend then selling a break of an uptrend. In addition, always sell for a loss of maximum 1% if it moves against you. The key is being out for 80% of the drops, and being 3X leveraged for 60% of the gains.
I appreciate your thoughts and agree. I'm currently still pondering a strategy for this coming week. You're not holding TNA, are you? Likewise, I'm not holding SOXL or LABU, and I'm wondering whether I should look to buy based on the early morning action, or simply wait for a pullback. Doing nothing is very appealing.
I looked at the weekly chart for SPX to see if last week's 'power move' was really that extreme, as I was feeling it was and the Zweig Thrust suggested it was. The week of March 14, 2022 was +7.30% from the Monday low (a continuation of the prior week's drop) to Friday's high and it continued up moderately for 2 weeks then fell. This past week could very easily turn out the same, as the first hard reversal from the July peak. I'll post the chart in a new update.
The week of May 23, 2022 was +7.32% from the low on Tuesday (which was higher than Friday's spike low. Clearly, this past week's +5.82% move from Monday's low (and +6.58% from Friday's low to high on Fri. Nov. 3) was not exceptional and there's a good chance the overall drop will continue. The move by IWM and XBI were more exceptional and they both have a longer road to recent highs. XBI is looking a lot like June 2022 (or it might turn out like May), so I may put my focus there. It's a devil I know, at least.
I completely agree, the "too far, too fast" is more of a cautionary guideline, and not a reason to sell or short and not a reason to enter UVXY. It's a bit like driving on the highway and in a long, steep climb. You know it's not going to continue forever, but you don't take your foot off the gas till you have cleared the top and accelerating past the speed limit. And there's no reason to assume you should be ready to hit the brakes suddenly either.
Not holding anything but cash. I'm going to buy UVXY on any gap down as I believe another gap up in the market is a trap and worth the gamble. I'm also looking for UVXY to crossover 20 hr MA.
SPX broke down to 4103 last week, so maybe a little lower. There "should" be a bounce for a week or two, but why guess? Wait and see if the downtrend gets broken and jump on for a ride. Then stay on until the trend support breaks. Avi may be wrong about 2022 lows.
This week might provide a sharp turn on Wednesday with the FOMC, and maybe some whiplash on Thursday and Friday. Also, SPX is useful as a guide and VIX is closely tied to it, whereas for a long trade, the better pick is generally QQQ versus SPY, and QQQ made a higher low on Friday from Thursday's low of 342.45. Friday's low was 344.13. If Monday holds above that, or in that range and holds, I'd buy with a stop sell at 342 if I was watching closely and able to catch a reversal if stopped out, or 341 or 340 if I wanted to give it some room and willing to take a 1% loss. The 1 hour and 30 minute charts should keep you on track.
Thanks for the update. Not to take anything away from Avi, but his resistance and support are nearly identical to the simple trend line resistance and support you drew on the SPY chart yourself. I am always looking for easier ways to make decisions.
Interesting point about 29% between weekly and monthly support. Unlikely we see any direct moves up or down, but instead choppy rallies and waves. The best time to short was the day after the rejection at 4380.
I also have heard examples of 10-15 year stretches of the market trading in a large range. Anyone holding makes no gains, but following trends you make 200%. Example just the last 24 months SPY is even. Similar to 1934-1949, 1956-1976, 1997-2011, etc. for Dow Jones. Buy and hold is usually a BAD strategy.
Totally agree, the simple trendlines that anyone can draw on their own have been very, very useful. Also agree that there won't be any direct moves, but 29% down to monthly support was eye opening for me.
SPX hit 4385 on Oct. 10, held the next day and fell hard the next two, which I thought was healthy. It gapped higher on Monday, rallied and held 4380 all day. For me, that move was suspicious. Gapping lower on Tuesday and powering up to 4393 was also suspect and I was watching for a reversal that came at 12:30. Unfortunately, I was only suspicious of the moves and didn't have conviction that a drop would ensue. If you were referring to Oct. 18 as the best day to short, then I would agree if you weren't already short from the high reversal the day before.
I also agree that buy and hold makes no sense nowadays. I wrote a short story the other day about 3 farmers who invested in TD bank in 1980. (That's how far back my charts go.) Two farmers bought shares and the third borrowed money to buy more land and equipment. Obviously farmer number 3 did the best financially. One farmer just held his shares and the other simply watched his stocks like he watched his milk cows and discovered took action a few times when shares seemed over valued. From the story: By the fall of 1989, it was getting erratic again with the price way up to 5.78 and then back down near $5. He thought to himself, "If I could get $5 on some of these old cows that I bought for $2 and have been milking for 5 years, I'd take it." So, he again went to his TD bank and talked with his advisor."
Back then he had to make a trip to town to meet with his financial advisor, so buy and hold, in general, made sense. Up until 10 years ago, it was still difficult for people to have control of their investments. Now, with a trading app on your phone, there's no excuse for not taking control and discovering that buy and hold is actually a BAD strategy.