The writer is a technical analyst, Bursa Graf from the Guideline Group
No matter how I analyze the direction of the American market, starting with the quarterly graph through the monthly, go weekly and end up daily, the negative signs are strong and present. I believe you have noticed the difficulty of the market to generate upward continuity, and how every attempt to rise is cut short. There was no “uptrend structure” here, and no indicator showed the market’s ability to rise. And one more little thing before I make you black in the eyes. The technical approach is loaded with nonsense and gibberish such as trend lines between which there is not even half of anything between breakouts or breaks of certain levels. The main thing that will work for you is understanding the direction of the market according to an arrangement of the high and low points objectively.
In the latest analyzes I set the target of 3,250 points in the S&P 500, which means that we are facing a wave of declines that will degrade the index below the October low. Unfortunately, the American market built the infrastructure for these declines for six months, providing everyone who wanted the opportunity to exit. Even in the local market, the situation is not encouraging – the Tel Aviv indices show weakness and the banks may also suffer.
The month of March is still far from over, but already today quite a few signs of weakness stand out that will increase the likelihood of a significant wave of declines. I will agree and explain them:
Negative momentum is getting stronger
■ If the rising sequence is broken and a descending sequence begins, meaning that 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 – which shows 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.
■ The breaking of the rising streak at the end of March means that the number of months in which the market spent in a rising streak amounted to five, and this compared to ten months in which it recorded a falling streak from the all-time high point to the low point of October. In a downtrend, the number of candles in the descending sequence is less than the number of candles in the ascending sequence.
■ Pay attention to the moving averages: the short is below the long, the two averages are sloping down, and the distance between them is increasing – three simple but incredibly effective indicators that mean that the negative momentum is not only with us, but has also strengthened.
We got 6 months of “amnesty”
■ The momentum indicators – they are still in negative momentum territory and at a low level where they have not been since the beginning of the wave of increases in 2009.
We got the opportunity to go out more than once; For the first time in January 2022 when the rising streak was broken after setting the all-time record. The second time was in the last few months. This is the typical behavior of downtrends – a brutal downward sequence first, then a period of relaxation that constitutes an “amnesty”, then another collapse. And the last six months have been one big amnesty.
Bio credit opinion writer
I developed the subject of sequences with the aim of pouring a little certainty into the market which regularly lacks it. In an ascending sequence, the closing price will be higher than the low of the previous candle. The reference will always be to the low gate of the highest candle in the ascending sequence. The purpose of the rising streak will serve as a key indicator in deciding whether to continue holding the stock or not.
Do you feel it is “crisis time”? This is how you should drive
The private investor tends to feel a time of crisis every Monday and Thursday. In fact, what will determine the depth of the fracture is the investor’s endurance. If these are declines in the market that he can tolerate, it is probably a “technical correction”, if he cannot tolerate them, it is a “time of crisis”. For many, the latest wave of declines in the markets is an avalanche. To deal with landslides and collapses, the private investor must be equipped with a number of basic tools, first and foremost mental strength and of course a work plan. This is what I would recommend:
1. Diversity. The non-professional investor knows a few stocks in the local market, and the professional a little more knows a few more stocks in the American market, which are scarce from various websites. Preparing for a time of crisis requires, first of all, broadening your horizons. Diversification”, meaning not only getting to know many more stocks, but also more and more markets such as commodities, the mutual fund market, ETFs, the bond market, etc. And not only that, but also getting to know more investment options such as trading in a falling market.
2. Trading plan. There are two central methods that I recognize for making decisions in life in general, and in the stock market in particular: For the first time, I call the “Tom Sawyer Method”, named after the literary hero who, when he wanted to cross the fence and didn’t know how, would remove his hat from his head and throw it over the fence. That is, First commit yourself to the task and only then start looking for the solution. This is the method that most non-professional investors adopt – first buy the stock and then puzzle over how to get out of the ‘baruch’ you’re in. The second method is called the “Secret Agent Method”. The Secret Agent He will never enter a place without preparing escape routes for himself. In the capital markets, this means that the investor must know where he is entering, build himself an orderly and pre-defined trading plan, which will also include escape hatches, and not deviate from it to the right or to the left.
3. Refinement and focus of thinking. There are quite a few distortions of thinking that undermine our ability to judge. The investor must try to make a complete separation between rational and emotional thinking, and of course between imagination and reality. Beware of “loss of proportion”, the human tendency to inflate mistakes, shortcomings or fears to monstrous proportions. And especially to distinguish when the thinking is emotional – when the reference to emotions is as a proof of reality. Along the lines of “If I feel that these declines are an avalanche, a sign that the avalanche has begun”, or “If I feel that I am about to lose all my money, that is probably what will happen”.