ITM Special Update 11 Jan 2023
This Bear will just NOT behave!
Well, last night Jerome Powell spoke – and the markets listened with bated breath, hanging upon his every word. No, I didn’t watch it (I’m not a masochist) but I read it. Boring. He refrained from commenting on rate policy, the markets thought that was a good sign and proceeded to bounce higher, out of bear territory and heading towards the 200 SMA. Here’s a 1 hour chart of SPY this year:
You can see it is far from decisive about moving up, apart from the huge day on 6 January. If we look at the chart since the most recent high on January 2022 we see that the downtrend still looks intact:
BUT – we have to be objective. Our OUT signal has appeared, as this baby bear refuses to turn into a big bear! We have to exit our bear trade tomorrow. The MACD histogram is positive and almost 1, telling us that for the moment the bulls are in charge. It is very unsatisfying, I know, as the market doesn’t really feel like it is bullish, but my feelings are not objective, and we have to respect what the market is telling us.
So how much did we lose?
If we take the close from the 20th December ($380.54) and use the close today ($390.58) as indicative of the price we will get tomorrow we will have bear traded a rise of 2.6%. Not good, very frustrating, but not the end of the world. The only traders who win all the time are the ones who make up their trades in hindsight. Losing is part of trading, and the aim is to keep the losses small and let the profits run.
But it’s not a bull trade just yet
And reiterating – just because we’ve exited a bear trade does not mean that we start a bull trade. Wait for the signal.
Heather
