Observations on
Psychology and the Markets
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?
Today’s One Chart is the Financial Sector SPDR ETF, in a follow-up to our post in early June on the confluence of resistance levels. As we’ll discuss in this article, the XLF is displaying a similar combination of factors, all suggesting weaker prices and likely underperformance as the sector continues to struggle.
Last week on The Final Bar, one of our Mailbag questions related to Amazon.com (AMZN) and how far it has reached above its 200-day moving average. This phenomenon speaks to the long-term strength of AMZN’s price movements, the short-term overreaching of the price since the March market low and the high likelihood of further upside for the stock.
