Well Defined

Today we’re looking at the charts from a different angle. Below are plots of the S&P from longest to shortest perspective, as opposed to the other way round as I usually present them. They all show a market that has followed sets of well-defined trends for some time. The challenge is just a matter of identifying them, whether they are short, medium or long term, and tracking how they break and shift over time. These points often make for great high percentage trade setups.

Taking a multi-frame perspective, from near term to long term or vice versa, is something I find very helpful in my trading day to day in identifying these setups. It helps me analyze the condition of the index, finding important lines of support and resistance, and put seemingly random day to day moves into a more systematic context. Put simply, it allows the story behind the data to come through more clearly.

S&P 500, daily bars, 2014.11.19

S&P 500, daily bars, 2014.11.19

The daily chart illustrates best just how strong the bull market has been in the past two years.

S&P 500, hourly bars, 2014.11.19

S&P 500, hourly bars, 2014.11.19

On the hourly, note the three phases of the move from the October 15th low that I’ve written about a number of times in recent posts.

S&P 500, 10 minute bars, 2014.11.19

S&P 500, 10 minute bars, 2014.11.19

The most recent phase is still well intact and developing nicely.

S&P 500, 3 minute bars, 2014.11.19

S&P 500, 3 minute bars, 2014.11.19

Right now, despite remaining fundamentally bullish, I’m a little uneasy with how calm this market has been lately, and the frequency with which the market has been testing rising lower trend channel support. Seasonality also favors caution in the coming week; the days leading up to Thanksgiving have a tended to see pullbacks in the past. Black Friday is often a better day to buy stocks than it is to buy discounted merchandise.

History is never gospel, and the trend doesn’t lie, but the listlessness in the market in recent weeks makes now as good a time as any to pare back any long exposure that may be keeping you up at night.

I’ll be back with an update tomorrow.

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