Let’s not forget that the biggest determinate of the success of bullish strategies (buying stocks, ETFs, mutual funds) is the market itself. Most things trend with the market. Markets always move around — but a series of higher highs and higher lows is a sign of a strong trend. #1 shows us the last market high set back in May. Since then, several rallies have failed to break into higher ground, while lows have managed to be lower. This increases the probabilities that the market may be “topping,” or may just be gearing up to take an extended breather. No, that’s not a forecast, just a probability. This is where having a plan and making sure you are on it is important — so you can weather the storms and be positioned well after them.
Notice next that the November high at #3 was only able to get back up to the March high, not the May, June/July, or July/Aug highs. The bulls continue to charge ahead, but each time, they are falling a little shorter. At #4, we saw the 50-day SMA (Simple Moving Average) cross below the 200-day SMA. Both of these are indicators of trend. Having both of them rising together is a good sign. Having the shorter cross below the longer is not a good sign, as it indicates the trend may be weakening. While the 50 has recovered some (#6), the 200 has flattened. No doubt the market had hoped to find some support at the 2039 level, but it has now blown through that level twice in August and now in November. We may hope to find some degree of support at around 2015 (#5), but there is no indication so far that it would be strong support.
Always remember to keep a long-term view and don’t build emotions in day-to-day activity. Lots of analysis is done to build portfolios with the characteristics we desire. Always remember that in between buy and sell is simply hold.
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