Current Market Cycle Trend, Fastly Trade Update, And My Thoughts On The Market

Market Cycle Trend = Up

Market Cycle Trend:

Up / Bullish

Bulls out pace the bears last week as price action ends up on the week with the broad markets gaining ground from a 335.07 Monday open to a 336.84 Friday close for a 1.77 point rise in the SPY.

Last week, we started off Monday where we saw the broad markets opening near the prior Fridays close, with the bulls closing the market higher 3 out of 5 days last week, with one down day, and one doji (open = close). By Friday, we were up on the week, only slightly however, to close 1.77 points higher than Mondays open.

Technically speaking, not much seems to have changed from the prior week. As we can see from the chart above, the broad markets have been melting up week over week now since our market cycle trend indicated an up / green market cycle back on July 1st.

The 100 simple moving average, colored in green, now curling up, will over take its 200 sma cousin, colored in magenta, in the coming weeks, assuming we continue to see sideways to higher prices from here, with a hold of the March 23rd trend line support.

Let's take a look in more detail last week action to put together a solid game plan for this week shall we?

As a trader, we look for "edges" to trade, and being on the correct side of the market has to be front and center right up there with capital preservation in my humble opinion. What we are looking at, is market cycle trend analysis on a daily price chart of the SPY. It's calculations are dynamically updated and I consider it a very valuable tool for when I am doing my top down analysis of the markets.

Since the SPY is comprised of 500 of the strongest stocks, it is considered by many a useful way to measure the financial markets. The chart above is the most recent market cycle trend analysis as of this past Friday market close. The blue box with the 5 price data candles are the most recent last 5 trading days, open, high, low, close candle sticks.

I believe this chart provides a unique and easy to understand visual representation of the current broad market cycle, at any moment in time, when viewing it from left to right, and most importantly in its present state, when viewing the right most date / last price bar.

The up and down bars you see in the chart that are colored in green, yellow, or red, is daily price data on the SPY chart with a special paint bar that I developed. I have found over the years that markets, and stocks, move in somewhat repeatable cycles between uptrend, downtrend, low and high volatile. The paint bars provide us an indication of both trend and volatility. How important do you think knowing this little bit of information provides us?

As a self directed trader or investor, you need to have an edge. Perhaps knowing trend plus current stock market volatility is just enough to give us the edge that we seek.

Take note of this current market trend, and any shifts in momentum as they develop to stay on track with where we may be headed next. Be prepared to act as necessary, if you want to stay in the game.

The chart above is the momentum of the broad markets snap shot from two Fridays ago. Last week I wrote:

"Underneath the hood, notice the momentum shift higher, for now at least. Bulls out pace the bears last week,as price action ends higher on the week with the broad markets gaining ground from a 328.32 Monday open to a 334.57 Friday close."

The question now becomes, where will the markets go from here?

As a trader, one of the challenges that is continually with us is to figure out how to be comfortable with this uncertainty of the markets, morose to actually embrace it. How do we do that?

Currently, what we see, based upon what we see the market currently doing is that we are more bullish, with lower volatility on a day over day basis from July 1st, as we have continued to remain in a green / up state market cycle - for well over a month now.

How much higher can we go? Where is the momentum of the SPY broad markets now, and what might be our game plan for the coming week?

Underneath the hood, notice the momentum has slowed, for now at least last week from prior week, as bulls out pace the bears last week, and price action ends higher on the week, but only slightly.

Fastly chart as of Friday, August 14th, 2020 market close.

Fastly closes at 79.33 Friday down 6.28 points on the week from Mondays open of 82.89

Update on Fastly - will it be my next winner?

Last week Fastly mostly drifted sideways, currently hovering around its 50 period moving average, closing slightly down on the week, with less than average volume each day.

Last week I wrote:

"I opened a new position on it on Friday, prior to market close, with an outlook to hold it perhaps a month or two, thinking that as long as long as it can hold support here where we are now, it may work out to be a really nice trade."

How is the trade working out?

Currently I am up overall on the trade with a slight overall unrealized gain, but have it on a tight rope, with less than 1% portfolio risk on the trade.

Where will it go from here? Did I get in too early?

So far, the trade is working out pretty good, so I am planning to continue to hold it. My goal is to earn at least a 1% gain, if not more on the trade. To accomplish this, Fastly has to continue to stay at the level it is now, or move slightly higher in the coming weeks.

Perhaps buyers will find it attractive at these levels to push it slightly higher in another week or two would be nice. We shall see.

Final thoughts on the market for the upcoming week - would you like to see my watch list?

Just like in life, the markets are dynamic, and ever changing. As a financial trader, you have to bring a fresh but prepared mind to the game every day. I am going to continue to be adapting my outlook with the markets, while knowing where my edge is, and trading my edge the best I can.

I don't like to guess at what the markets will do, as I have come to learn that's pretty much a fools game, and hindsight is always 20 / 20.

I am best when I act on what I am seeing it doing. and I what I do know is that right now the market cycle trend, as of Fridays close, is telling us that we are in a lower volatility up trend based on recent market behavior, with slightly slowing momentum last week from the week prior.

Assuming we have more of the same, I will be looking for new trading opportunities in the coming week that takes advantage of current market conditions, which is a lower volatile sideways to up trending market.

Here are a few of the stocks that I found in my research this week that look compelling for one reason or another which are on my hot list that I am considering:

AAPL, FTCH, MELI, NKLA

Thanks for reading...

Today, I wrote about the current state of the markets, including the market cycle trend using my proprietary trading tools, provided an update on a current trade I am working, discussed a game plan for the upcoming week, and shared my hot list of stocks that I am currently watching.

Until next time ... Stay safe, and happy trading!

Disclaimer: I either recently had positions in these names, currently have positions in these names, or may be taking positions in any of the proceeding names within the coming days or weeks ahead.

Stocks, Options, and Futures have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to buy or sell stocks, options, and, or futures.

No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed. The past performance of any trading system or methodology has the benefit of hindsight, and is not necessarily indicative of future results.