The Wall  How to Discern Context to Predict Future...
As I'm writing today's blog, the S&P 500 is getting frisky with an important short-term level that could potentially dictate the market's direction for the next month or even the upcoming eighteen months. Don't believe me? Think that reading charts is hocus pocus or some nebulous endeavor more appropriate to the Mystics?
Despite how it can appear at times when it plays out nearly identical to forecast, we all know that no one can predict the future. Best of all, as I've outlined before, its a waste of time to attempt to so why not redirect that cosmic energy (pun intended) to a worthy skill -- like reading the price on a chart. That said, let's bury the crystal balls for a minute and break down some simple price action to reveal the not so magical art of reading a market.
Below is a 60 minute chart of the S&P 500 index. Note how each time price has been at this zone it has essentially taken a nose dive off the Empire State Building. See all the red bars after price tests the 2930 to 2940 level? Can you see how the drops were near vertical on two occasions? Interesting, right? Its a subtle distinction BUT it can make all the difference in the world when it comes to analyzing market behavior.
Next up is the same chart, but this time I added one of those fancy arrows (purple thing in the middle). Can you see how that green bar launches in a vertical fashion toward the zone we outlined earlier? Easy come, easy go - right? You see like most things in life if we take an impulsive approach toward something it usually fizzles out just as quickly as it began...this is exactly what is playing out here in the markets but on a very large scale.
Lastly, take a look below and notice how the move higher is stair-stepping toward the 2930 to 2940 zone. This rally was methodical and has a much higher probability to succeed in breaking through to the other side of the zone.
That said, and this is where most people throw the baby out with the bath water, its a market with buyers and sellers constantly positioning themselves, their investors, or whoever else is willing to invest -- so anything can happen, but my money would be on this level getting beat and supporting more of a bullish scenario going forward. The fun part isn't whether or not I'm going to be right but how to capitalize on what it actually does and the masses of investor that haven't developed the skill of reading price.
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Greater clarity in anything, ultimately means more opportunities to choose from. Wouldn't it be more enjoyable to approach investing with a real edge as opposed to getting filtered information by someone you think knows better than you?
Don't take my word for it or judge me based upon a single qualification on a dead resume, or something I accomplished in college. The truth is, if a so-called professional can't show you in real-time where a particular stock or market is headed, then they are guessing (and sadly most are because they have mastered a skill set in sales, relation building, or just a slick haircut, as opposed to reading the markets which can take a lifetime to develop).
We don't guess at Principles and neither should you, especially since it's your money. Remember, no one cares more about your hard-earned savings than you do. Isn't time to invest in your investing?
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