What is technical analysis?
A method for making an investment decision in the capital markets, which is based on market behavior. The graph is the final result of the decision-making equation of all investors in the market, thus embodying all the information relevant to the decision
The writer is a technical analyst, Borsa Graf from the Guideline Group
Contrary to popular opinion, the method I represent is not a tool for divination, rather it relies on behavioral precedents that have stood the test of time, and that time is longer than any economic or other approach. Over the years, all kinds of unproven approaches and methods have emerged, including drawing trend lines. Subjective analysis tools deserve to be thrown in the trash, since one of the cornerstones of the technical analysis method is objectivity. And the better you get at using simple and basic tools, the more the method will benefit you. With me, you must have noticed, the analyses, tools and approaches I teach are basic and simple.
And we will return to the object of our analysis – the American stock market, represented by the S&P 500 index, and it continues on its clear downward path. It would not be correct to attribute this to interest rates or the collapse of banks, but only to the end of an upward cycle that lasted more than a decade without any proper correction. On the way down, there are definitely quite a few fixes going on, as you’ve probably noticed – some major, some minor, some brutal and some more subtle. For example, last Thursday there was a sharp increase that encountered a level of resistance that caused the market to retreat.
Following on from the analyzes of the last few weeks, the target I marked – the area of 3,250 points in the S&P, is still in effect, when the wave of declines that should degrade the market to this level has already started, after the road there has been paved for the past few months.
The sellers are willing to compromise on the price
● March is not over yet, but the emerging direction indicates a significant wave of declines according to some signs that I mentioned and will mention again.
● If the rising sequence is broken and a descending sequence begins, where the March closing rate will be lower than the level of 3,943 points, this means that a lower peak point will be set than the previous one, meaning that the sellers are willing to sell the same commodity at a lower price than the one they sold last time. It also means that the October low will be broken below.
What is a falling gate?
When the closing price of the index is lower than the high of the candle that preceded it. The reference will always be to the high of the lowest candle in the descending sequence. Is a key indicator in the question of whether to continue to hold a short position on the one hand, or not to purchase the stock yet on the other hand.
● The breaking of the rising streak at the end of March means that the market will conclude five months of an ascending streak, compared to ten months in which it was in a falling streak*, from the all-time high point to the low of October 2022. In a downtrend, the number of candles in the descending streak is less than the number of candles in the ascending streak.
The markets are in a weak position
● The moving averages – the short one is below the long one, the two averages slope down and the distance between them increases. These are three indications that make it clear that the negative momentum is with us and is even getting stronger.
● The momentum indicators that I presented in detail in previous analyzes – are in negative momentum territory, at the lowest level since the beginning of the wave of increases in 2009.
The American stock market, as well as the local one, is in a weak position for the future. This is not the time to buy stocks, even if they look cheap. Wait a little and you can get a nice discount.