Market Focus Report ~ Monday October 24th, 2022 ~ 63rd Edition

{!firstname_fix}, with last weeks bear market rally, is this the start of a new uptrend?

~ Market Focus Report ~

~~ Monday, October 24th, 2022 ~~

~ 63rd Edition ~

Today we will be discussing the following topics:

What is the current market sentiment?
What might our market cycle volatility trend be telling us?
When would be the "optimal time" to get back in or be more bullish than bearish?

Let's Go!

You cannot do everything alone — especially when you get to a certain level. It is impossible.

Hamdi Ulukaya, Chobani founder

Current Market Sentiment:

With five trading days last week, as determined by measuring the difference from the Friday close of 374.29 from the Monday open of 364.01 price, we ended the week higher by 10.28 points as a measurement on the SPY broad market exchange traded fund (ETF), with a strong bullish rally leading into the close on Friday capping off the 10.28 point gain on the week.

Broad Market Cycle Volatility Trend

Transitioning Up - Yellow Price Bars

~~ As of October 21st, 2022 ~~

Market Cycle Volatility Trend Week Ending Friday, October 21st, 2022

(Click Image Above to Enlarge)

When looking at the Market Cycle Volatility Trend chart above, this chart demonstrate to us when the financial markets turned to a yellow transitioning / up trend state last week on Friday, October 21st, when our Market Cycle Volatility Trend went from a prior red / down higher volatility condition to a yellow / transitioning trend state, which means we have transitioning market relative to recent past.

What might all of this be telling us about the broad markets, and what might be a game plan for the upcoming week?

The question now becomes:

Where might the markets go from here?

Last week, with 5 trading days, the market had a close > open 2 out of 5 days, to be ending the week with a strong bull market rally ending the week over 10 points higher than the Monday open.

A while back, in our last Market Focus Report I wrote, "...brace for perhaps more selling to come, as I think we may have seen the steam run out for the bulls, at least for now..."

So what's next? What do I see when I pear over my my crystal ball sitting at the edge of my desk?

Actually, the broad markets are precisely in a state of transition when looking at the mid and short term charts. The long term however tells a different story. They are still clearly in a down / red more volatile trend. The prudent thing is still to remain with a bearish outlook, with last weeks action being labelled yet again a "bear market rally."

What "has to happen" for this to change? We will get a longer term transitioning state. This "may" happen in the coming weeks. When, you ask? Perhaps as early as next week, or perhaps we test the 100 simple moving average which isn't far north from here, and then go lower again.

But honestly, I don't know for sure, and am not able to predict the future. (whisper, I don't actually have a crystal ball!) But these are the likely scenarios that may take place in the coming days / weeks ahead.

Market Cycle Volatility Long Term Trend Week Ending Friday, October 21st, 2022

(Click Image Above to Enlarge)

When would be the "optimal time" to get back in or be more bullish than bearish?

To trade in the markets, whether it be stocks, options, or futures, your primary objective is proper risk management, followed by a plan that you can execute with confidence that works with your psychology. Having been a student of the markets now for over two decades, trading multiple accounts large and small, across multiple asset classes, I can honestly say that trading the markets is, and should not be, for everyone. Most would be better off hiring a fund manager, and working at their chosen craft. Trading the markets is truly a challenging vocation be any means. It takes an extremely large amount of time, skill, and patience. Not only that, it obviously takes capital. And if you want to be a professional trader, no matter what market and time frame, it takes a lot of capital, perhaps $500,000 of "risk" capital or more.

What types of trading can one do?

There are three main types that I am aware, day trading (all trading decisions are made intraday to be flat by the market close), swing trading (I have seen this largely referred to trading that has a time frame from several days to several weeks, which is true, but to be more precise, it is actually catching the "swing lows" to go long, or "swing highs" to go short, and then we have the longer term trading, where one would strive to stay in their chosen position(s) for 2 or more weeks, if not months at a time.

For this section today, I am going to write about the "longer term trading" targeting someone that desires to be on the "right side" of the market. You know, aka "market timing." But can one "really" time the market? Most capital fund managers would like to tell you that is is "impossible" and that by being out of the market at the wrong times, would cost you dearly. And while this is partly true, some days there can be large bullish gains, but when the overall long term trend is down, these are only short lived.

So back to our question, is market timing possible? I believe it is, but, (and this is a big one), it is not easy. To do so, takes knowing the different market cycle types, across multiple time frames. The good news? That is precisely why I developed my volatility trend technology in the first place!

So here is how it works, if we take the three time frames, shorter, longer, and medium, they each appear to cycle similar to each other, up, down or transitioning over time. This pattern is seen to repeat itself, over and over, and over again. Once the longer time frame cycles to yellow, we know that we are once again in a transitionary cycle, and look to be more bullish, unless it fails, or once again turns to red.

For now, it is still red.

When will it cycle to yellow?

I don't know, but when it does, that to me, will be a good time to "then" start feeling better about the current bear market state that we have been in since January of this year. Why do I say January of this year? Because that is precisely when the longer term volatility trend turned red, and has stayed predominantly red since.

So that's it. The markets are ever changing, and leaves behind for us identifiable clues. All one needs to do is have an understanding of what those clues are, and to take action accordingly.

Market cycle timing is possible.

Thanks for reading...

Oct 23, 2022