To The Moon

The S&P500 has been hitting record highs in recent weeks. Is there still momentum to continue this bull run?

1D chart as of 27 Mar 2024

From the 1D chart, here are my observations:

• The MACD indicator is still showing a bullish trend. A top crossover looks possible in the coming days. As the crossover is yet to be completed, this could take days to realize.

• The Chaikin Money Flow (CMF) indicator is showing a downward trend. Some traders use the crossover with the 0 (zero) line as a reversal signal.

  From the chart, CMF is trending down and it is consistent with the falling volume of S&P500.

This does not mean that the S&P500 MUST fall today. However, we have learnt that market movements (of ups and downs) are just part of the typical market volatility.

Relying on 1 single indicator to predict the market trend is presumptuous. It is recommended for us to consider a few. Using too many indicators can be distracting too. Let us make sure that we backtest some of these setups before adopting a technical analysis (TA) approach for position entry and exit.

Elements of Trading

Price is the result of demand meeting supply. There are three elements that I have identified in stock price movement. The three elements include price, time and volume. Essentially, my technical setup should have components covering all three elements so that I can establish a more comprehensive view.

My current setup includes the volume candles, MACD indicator and the Chaikin Money Flow indicator. I would add moving average lines using a “one day” (1D) chart to help me track golden and death crosses. I have watched a YouTube video previously when a trader backtests 100 trades, using only the MACD indicator for entry and exit. This has given him a healthy 70% win rate.

There is NO perfect setup as there are many components at play. We should not rule out economic policies, trade sanctions, natural disasters, geopolitical issues and other Black Swan events.

With the technology on hand, it is possible to develop a system factoring many considerations. Sentiments rule the market in the short term but value is essential in the long run. If time is the best return on investment (ROI), sowing with “excessive time” may not be a good start. Let us find an investing or trading strategy that is appropriate for our current season of life. There may not be a downside to learning but it should not come at the expense of our health, family and personal well-being.

Let us make time to find out what works best for us. Let us find the “balance to stick and tweak” accordingly. It requires conviction to sail through a stormy season but we should balance this with humility to learn and evolve.

I try to live with a mentality that “I could be wrong”. It is not so much humility as it is painful lessons. I wish you all well and do not forget to do our due diligence.

Chaikin Money Flow (CMF)

This is extracted from the Trendspider website about CMF.

Chart from TrendSpider

The Chaikin Money Flow (CMF) is a technical analysis indicator developed by Marc Chaikin to measure money flow into and out of an asset over a specified period, typically 20 or 21 days. By considering both price and volume data, CMF seeks to provide insights into the strength of an asset’s trend and potential reversals. The indicator oscillates above and below the zero line, with positive readings indicating an uptrend and negative readings suggesting a downtrend.

@TigerStars

$Cboe Volatility Index(VIX)$

$S&P 500(.SPX)$

$SPDR S&P 500 ETF Trust(SPY)$