So is the market, because every day is like reading another page. The pages of a book form chapters. These chapters of trading represent bull markets, bear markets, distribution and accumulation, and periods of high and low volatility.
Unfortunately, in trading, we can’t jump to the back of the book to find out how everything is going. However, as traders, we have learned that studying and remembering the past can pay off big.
Price trading in its rawest form is simply plotting and studying price without using moving averages, stochastics, RSI or other technical indicators. This simplified but often overlooked methodology can offer everything a trader needs to succeed.
NASDAQ 100 Lower Lows and Lower High
QQQ – The Nasdaq 100 ETF made lower lows and lower highs. A longer term analysis of the price shows us that the 2022 low is lower than the lowest price QQQ had traded in 2021. QQQ in 2021 had a peak to trough range of 26.03%. So far in 2022, the QQQ has seen a peak-to-trough range of 28.71%.
Therefore: the price shows that QQQ is collapsing and volatility is increasing as it is higher than last year.
QQQ • ETF INVESCO QQQ TRUST • NASDAQ • 4 HOURS
S&P 500 Lower Lows and Lower Highs
SPY – The S&P 500 ETF made lower lows and lower highs. The SPY in 2022 had a peak to trough range of 18.74%.
Therefore: the price shows us that SPY is collapsing and it seems to have reached a major high, the confirmation being a new low.
SPY • SPDR S&P 500 ETR TRUST • ARCA • 4 HOURS
DOW 30 Lower Lows and Lower Highs
DIA – The Dow Jones Industrials 30 ETF made lower lows and lower highs. The DIA in 2022 had a peak-to-trough range of 15.02%.
Therefore: the price shows us that DIA is breaking down and seems to have reached a major high, the confirmation being a new low.
Note: The DIA is doing better than the QQQ or SPY as money flows are turning away from previously high performing stocks and seeking safety in underperforming blue chip stocks.
DIA • ETF SPDR DOW JONES INDUSTRIAL AVERAGE • ARCA • 4 HOURS
US Dollar Highs and Lows
UUP – The US Dollar ETF made higher highs and lower lows. The UUP in 2022 had a peak-to-trough range of 10.43%. UUP also reached its highest peak in 2021.
Therefore: the price shows us that the UUP has broken out higher and is in a bull market, with the confirmation being a new high.
According to the 2019 Triennial Survey of Central Banks conducted every three years by the Bank for International Settlements: trade in foreign exchange markets reached $6.6 trillion per day in April 2019. The BIS report has in further noted that the USD is associated with 88% of all transactions, which is over $5.8 trillion in daily USD transaction volume.
The US dollar continues to attract capital from investors around the world. But it may turn out to be a double-edged sword for US equities. As capital flows into the USD, this, in turn, hurts US multinational corporations as they have to convert their meager foreign currency earnings back into USD.
The safe haven trade in USD could eventually trigger a massive, deep sell off in US equities. As the US dollar continues to strengthen, corporate profits of US multinationals will decline or disappear.
UUP • INVESCO DB USD INDEX BULLISH FUND ETF • ARCA • 4 HOURS
Learn from our team of seasoned traders
In today’s market environment, it is imperative to assess your trading plan, portfolio holdings and cash reserves. Experienced traders know their downside risk and adapt if necessary. Successful traders manage risk by using stop-loss orders, rebalancing existing positions, reducing portfolio holdings, liquidating investments, and moving into cash.
The successful management of our direct debits guarantees our commercial success. The bigger the loss, the harder it will be to make up for it. Consider the following:
- A 10% loss requires an 11% gain to recover
- A 50% loss requires a 100% gain to recover
- A 60% loss requires an even more daunting 150% gain just to break even.
Recovery time also varies considerably depending on the magnitude of the drawdown. A 10% drawdown can usually be recovered within a few weeks or months, while a 50% drawdown can take several years to recover.
Depending on a trader’s age, he may not have time to wait for recovery or patience. Therefore, successful traders know that it is essential to keep their withdrawals within reasonable limits, as most of them have learned this principle the hard way.
To TheTechnicalTraders.commy team and I can do these things:
- Reduce your FOMO and manage your emotions.
- Have proven trading strategies for bull and bear markets.
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- Provide above average returns/growth over the long term.
- Have consistent growth with low volatility/risk.
- Make trading and investing safer, more profitable and more educational.
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Chief Market Strategist
Founder of TheTechnicalTraders.com