SPX: The most important Dow Theory's tenet!
Hello traders and investors! We have a new record high today, but how this is going to affect us?
First, there’s nothing telling us that the index might drop again. We have a healthy bull trend, and this is characterized by higher highs and higher lows. Pullbacks are natural movements, and so far, they were just opportunities to buy.
Will the market drop again? Absolutely. However, let’s remember the 6th tenet of the Dow Theory: Trends persist until a clear reversal occurs. I think this is the most overlooked tenet, and ironically, the most important one. As long as we don’t see a clear reversal pattern, there’s nothing to do, but keep saying that pullbacks are opportunities to buy (like I’ve been saying for the last year, and my followers are aware of this).
Some people might be nervous in buying stocks at such a high level, but to me, it seems people will always find an excuse to be afraid. When the Covid hit us hard last year, giving many amazing opportunities, I’ve seen people afraid too.
In the end, it doesn’t matter too much, and it is all about you. If you just know where to look, and if you pick the right stocks. As crazy as this sounds, I still see several opportunities around, regardless of the market’s movements.
Now, what could cause a pullback on the SPX? The answer is: A bearish structure. If higher highs/lows are a trait of a bull trend, if we suddenly see lower highs/lows in the 1h chart, probably we’ll correct in the daily chart. Something like this:
Of course, it is not always that perfect, but you know what I mean. This could cause a pullback to the 21 ema in the daily chart, and this is as far as I can go now. There’s nothing telling us that this will happen.
Let’s focus on the technique, and not trade what we want to see, but what we are seeing right now. Now it is not the time to buy SPX, but this doesn’t mean it’ll crash again.
If you liked this analysis, remember to follow me to keep in touch with my daily studies. And please, support this idea before you leave!
Thank you very much. Have a good weekend/holiday!
First, there’s nothing telling us that the index might drop again. We have a healthy bull trend, and this is characterized by higher highs and higher lows. Pullbacks are natural movements, and so far, they were just opportunities to buy.
Will the market drop again? Absolutely. However, let’s remember the 6th tenet of the Dow Theory: Trends persist until a clear reversal occurs. I think this is the most overlooked tenet, and ironically, the most important one. As long as we don’t see a clear reversal pattern, there’s nothing to do, but keep saying that pullbacks are opportunities to buy (like I’ve been saying for the last year, and my followers are aware of this).
Some people might be nervous in buying stocks at such a high level, but to me, it seems people will always find an excuse to be afraid. When the Covid hit us hard last year, giving many amazing opportunities, I’ve seen people afraid too.
In the end, it doesn’t matter too much, and it is all about you. If you just know where to look, and if you pick the right stocks. As crazy as this sounds, I still see several opportunities around, regardless of the market’s movements.
Now, what could cause a pullback on the SPX? The answer is: A bearish structure. If higher highs/lows are a trait of a bull trend, if we suddenly see lower highs/lows in the 1h chart, probably we’ll correct in the daily chart. Something like this:
Of course, it is not always that perfect, but you know what I mean. This could cause a pullback to the 21 ema in the daily chart, and this is as far as I can go now. There’s nothing telling us that this will happen.
Let’s focus on the technique, and not trade what we want to see, but what we are seeing right now. Now it is not the time to buy SPX, but this doesn’t mean it’ll crash again.
If you liked this analysis, remember to follow me to keep in touch with my daily studies. And please, support this idea before you leave!
Thank you very much. Have a good weekend/holiday!
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