Market Update: Where do we go from here?

May 17, 2020

I get calls all day long asking where the markets are headed. Let's answer that question by doing some more Technical Analysis on the charts. Maybe we should be listening to the old axiom, "In May go away"...then again, maybe not.

As you can see by the chart of the S&P 500 below, there are several elements guiding our decision process with respect to Trend. We primarily track the trend in Price by programmatically coloring the candles according to the trend demonstrated in our custom indicators.

When it comes to Trend, our primary indicator is called the "Vindicator". An integral part of the Vindicator is what we call the "Long-Term" or "LT". It is the red line of the Vindicator as illustrated below. If LT is increasing then the trend is up and prices are going up.

Click for larger image

In terms of Time, we prefer to follow a 4 hour chart with extended hours turned off to filter out some of the noise, but still remain granular enough to catch changes in direction early enough. As you can see we entered the trade going long on March 23rd. This turned out to be a good entry point.

The question is should we continue? I do see the markets weakening, but I would not get out of the long position until that LT turned negative. Yes, this could be the end of a long counter-trend rally, but I'm willing to risk a few dollars to the down side to confirm the trend reversal. So the answer is to sit and wait for LT to either continue higher or break down.

The point is that we are unsure which way it is going to move. We will continue to closely monitor the LT and the Trend. For now, the Trend is still up, but we are cautious.

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