Chart of the Day: Get To Work

JC Parets
July 11, 2022

The market has work to do.

We've been in a Bear Market since February of 2021 when stocks peaked. Since then it's been a slow deterioration ultimately hitting almost every sector, with some areas just getting absolutely destroyed.

But just to keep it simple, the bottom line is we're below overhead supply in almost every case. There are exceptions, but I think the S&P500 shows what's really going on for the average and median stock or sector.

This is a top, and price is below former support:

Go count how many stocks are above a rising 200 day moving average. I'll wait, because it won't take you very long....

Stocks are below downward sloping smoothing mechanisms across timeframes, and below overhead supply.

There's work to do.

You can look at a chart of Bitcoin & Ethereum and you'll see the exact same thing: Below overhead supply.

So like I said, the market has work to do.

We've been trying to take advantage of this mean reversion in many stocks recently. But for now, it's hard to call it more than just that - a reversion to the mean.

The S&P500 would need to be above all that former support, and same for BTC and ETH above.

I think they're telling the same story. Mean reversions continuing are certainly possible. But then what?

So I think it boils down once again to identifying your time horizon.

This is different for all of us. Our risk tolerance and overall objectives are very different as well.

So let's keep that in mind when we ask, "Hey is the market going to go up or down?".

We want to identify trends across time horizons. Very long-term, I'd argue the S&P500 is in an uptrend.

In the intermediate-term I'd argue the S&P500 is in a downtrend or sideways trend.

And short-term we have an uptrend or sideways trend.

That's how I see it.

Now this also depends on your definition of time horizons.

For me it's as follows:

Long-term: Years/Decades

Intermediate-term: Quarters/Years

Short-term: Weeks/Months

But you're welcome to have your own definitions for what's best for you.

JC

 

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