The last five months of market history are a blur for me. Back in mid-March, the S&P 500 was in free fall with no end in sight. Here we are in mid-August, and the S&P is retesting all-time highs. Trend-following is about defining the trend, recognizing shifts in the trend and anticipating potential trend changes. So now that the S&P 500 is in a raging uptrend with no apparent end in sight, what would I need to see to turn bearish?
I think many investors focus too much of their time on entry points and getting the market call correct, and not enough time managing risk and clearly defining an exit strategy before it's needed. To put another way, when the market actually stops going higher and begins to drop, that is not the time to begin developing an exit strategy!
As we were recording the latest episode of my closing bell show The Final Bar, I started to think about a bull market top checklist. What would I need to see to acknowledge that an uptrend has exhausted?
Here's a rough draft of what I'll be looking for in the coming weeks and beyond. Until I see these signs of weakness, the trend will, by definition, remain positive.
You can read more over at StockCharts.com.
RR#6,
Dave
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