Market Milestones: Trends, Friends & Ends

[Image] Happy Friday , If we look at the SPY, which is the S&P 500 ETF, we can see that the market has moved sideways for an entire month. It reached $475.00 on December 19th and proceeded to chop sideways ever since, teasing the bulls with the idea of an all-time high. It looks like the bulls are about to get that SPY all-time high they have been patiently, or not so patiently, waiting for. Even with the sideways movement, the SPY has had an epic 3-month rally. If it makes a new all-time high in the next two weeks, that would mean it has moved over 17% in that three-month time period. By my count, it is in the 5th wave of a larger 5th wave. This means that the larger retest we were wanting in January has just been pushed out. Some targets and key areas to watch for this move to complete are: $481, $491, and $505. The big question, and the one on the top of my mind, is whether 2023 was an ending diagonal or a leading diagonal. That question will be answered this year. SPY [Image]( Although the SPY, QQQ, and DIA have been consolidating in a pretty tight range, it might not feel that way for many traders. That is likely due to the extreme moves we have seen in high-beta growth stocks and the IWM. While the IWM had a 27% bull run to end 2023, it has only gone down in 2024. The IWM blasting off in November of last year helped with overall market breadth, but now it seems we are back to relying on a few key stocks to pull this market higher. Speaking of dragging the market higher, semiconductors have been the talk of the town since mid-2023 as the A.I. trend became mainstream. I mean that literally. People who don’t trade stocks and are not familiar with tech are now talking about Nvidia. Taiwan Semiconductor (TSM), the 10th biggest company in the world, just reported earnings and closed up 10% on Thursday. This caused AMD and NVDA to both hit new all-time highs. VanEck’s Semiconductor ETF (SMH) also hit a new all-time high on Thursday and is up 116% from its 2022 low. This shows the importance of a trend. Trends are critical from a technical analysis perspective, as well as from a fundamental perspective. SMH [Image]( [Image] Stocks never move in a straight line. They dip and dive, duck and dodge, rip and roar, and rally and rise on their journey through time. But through all the ebbs and flows, there is always a trend: up, down, or sideways. Correctly identifying the trend is one of the most important steps in trading and investing. The trend is simply the direction that the price is moving, compared to where it has been in the past. There are different trends depending on the time frame you are trading, sometimes referred to as primary, secondary, and minor trends. For instance, a trend could be bullish on the monthly chart, sideways on the daily chart, and bearish on the hourly chart. The hold time of a trade or investment will determine which time frame you will analyze. An uptrend is defined by a rising price over time with higher highs and higher lows. A downtrend is defined by falling prices over time with lower lows and lower highs. If it is not doing one of those two, it must be moving sideways and frustrating the bulls and the bears in some kind of channel. Three great ways to define the trend are trendlines, moving averages, and moving average crossovers. There are many technical indicators that can help traders determine the trend, but these three, along with just looking at the chart and determining the direction it is headed, are the easiest. A trendline is simply a line drawn on a chart that connects a series of highs or a series of lows. Trendlines are subjective; some traders love them, and some traders hate them. Either way, they can help traders track the trend and, more importantly, recognize when that trend breaks. Trendlines often are not exact, so it is sometimes helpful to copy a trendline a few times, creating a trend zone to give the stock a bit of wiggle room. Below is an important trend zone on TSLA that is tracking a series of higher lows. TSLA [Image]( The next way to track the trend of a stock is with moving averages. If the current price action is above a moving average, it can be defined as bullish; if the stock is below that moving average, it can be defined as bearish. The shorter the number of days you are using as your moving average, the more fluctuation you will get between bearish and bullish. For example, if you use a 10EMA vs the 100SMA, the trend using the 10EMA will be much more reactive and switch more often between bullish and bearish than the 100SMA will. If one moving average is not enough for you, add another. Moving average crossovers are perhaps the most popular way that traders use to determine the trend. The most famous moving average crossovers are the death cross and the golden cross which use the 50DSMA and 200DSMA. However, this strategy can be done with the 10EMA and 20EMA or the 8EMA and the 21EMA or any combination of moving averages you can think of. [Image] Once the trend has been decisively determined, trading with the trend is always going to be the easiest course of action. Buying dips in bullish trends and selling rips in bearish trends is a great way to carve out gains. Larger trend changes on bigger time frames take time to play out or they present themselves with gaps that cannot be ignored at which point the analysis will change, and risk can be mitigated. But until the trend breaks, the trend is your friend. mailto:support@thetradersplan.com mailto:support@thetradersplan.com Thanks for reading team! Send us your thoughts. Was the 2023 price action a leading diagonal or an ending diagonal? [Team bull or team bear?](mailto:support@rltnewsletter.com) mailto:support@thetradersplan.com Strive On, Yates Craig, RLT Market Analyst Disclaimer: Trading involves inherent liabilities and risks. By accessing this newsletter, you acknowledge and understand the associated risks with trading and investing. This newsletter or email does not serve as a solicitation to buy or sell any security, and its content should not be construed as financial advice. The trades, analyses, and results presented are for entertainment and educational purposes only. These materials do not substitute professional advice from a qualified individual, firm, or corporation. Past performance does not guarantee future results, and simulated performance results have inherent limitations. Readers are strongly urged to consult a qualified financial advisor or professional before making any trading or investment decisions. Each individual's financial situation is unique, requiring personalized advice. 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