Market Milestones: The Great Pyramid of SPY

[Image] Happy New Year , Quality over quantity. That was the theme of 2023. The Magnificent seven along with the A.I. revolution carried the markets from the depths of despair all the way to new all-time highs. While less than 10 stocks did the vast majority of the heavy lifting for most of the year, it is true that breadth expanded in November and December. We can see the ‘it’s only 7 stocks’ theory very clearly when we look at the outperformance of the S&P 500 vs the S&P 500 Equal Weight. The S&P 500 outperformed the equal weighted index by 12%, which was second biggest outperformance ever. The end of the year expansion in breadth is good and very much needed for a continued bull run into 2024. MSFT and NVDA can’t do all the heavy lifting, or can they? A.I. robots are pretty strong. Anyway, their strength resulted in the Nasdaq 100 returning an astounding 53.81%. Check out the yearly chart on the QQQ! It’s pretty wild and sums up the absolute savagery of last year’s bullishness. QQQ Yearly Chart [Image]( After finishing 2023 just a few pennies off of all-time highs, the markets gapped down on Tuesday, kicking off 2024 with some light bearishness. It’s unlikely that this correction is catching anyone off-guard. After all, SPY went up nearly 17% in 43 trading days to close out the year. Because it’s so expected and everyone is on board with a nice buyable correction, its likely to either be a lot steeper and scarier that most people expect or over in the blink of an eye leaving all the dip buyers empty handed. If it is the latter option, the eventual larger retest is likely to get really gnarly. SPY [Image]( [Image] Because this pullback, like all pullbacks, will be inherently difficult to time, scaling into positions using pyramids can be a great entry strategy. The reason it’s called a pyramid is because the number of shares purchased gets greater the lower the stock goes. With pyramiding, as with any trading strategy, the risk is known ahead of time and the plan for worst case scenario always has to be thought out and written down. Check out the link below for a video with information on pyramids and position trading. [The Great Pyramid Video]( The SPY pyramid that I have been planning has been on my chart for the last three weeks. Is it possible that SPY fills the November 2nd gap, all the way down at $423? Of course! In that case all of the levels of the pyramid will fill, puts will be purchased and it will look like a losing trade. However, as long as the October low holds, the trend will remain bullish and new highs are still in anticipated. That is why protective puts are great risk mitigation tools if one is comfortable with hedging with options. If not, Real Life Trading has a top-notch course on the subject. No one knows where the markets will go over the next 12 months. The Wall Street analysts were predicting a negative year for 2023 and look how that turned out. It’s fine to be wrong, we are all wrong constantly as traders. It’s staying wrong and doubling down that can kill portfolios and returns. The trend is your friend and the trend is bullish going into 2024; the dip looks buyable, for now. However, if major tops start to form, key levels get broken or critical gaps appear, downside protection and a more cautious outlook should be implemented. What would you like us to review and cover in the 2024 Market Milestones? [Send us an email and let us know.](mailto:support@thetradersplan.com) Strive On, Yates Craig, RLTN Market Analyst Disclosure: You are responsible for your own trading decisions. ALWAYS, do your own research before investing in any of the above securities. This is not a solicitation to buy/sell ETFs or securities. NEVER invest money in ETFs or stocks that you can't afford to lose. You can lose all of your capital by trading any securities mentioned. These ETFs/securities are very volatile and gain and lose value quickly. We reserve the right to freely trade in any mentioned ETFs or securities. We are not compensated by any mentioned companies. We trade ETFs and securities based on our opinion of intrinsic/possible future value only. We are not registered investment advisors, so always do your own research before buying any securities. Unable to view? Read it [online]( If you no longer wish to receive mail from us, you can [unsubscribe]( Sent from: Real Life Trading in Nashville TN 37221