Two degrees of trend in diverse markets
This post is meant to provoke thought, more than impress my view of the markets. Four different types of markets are represented here, Stocks(SPY), Real Estate (IYR), Treasury Bonds (TLT), and Precious Metals (GLD).
There are nearly infinite ways of looking at the markets technically. I've decided to keep it simple with linear regression as the most basic representation of trend. Each chart has a long and short term linear regression trend. The short term is represented by a simple LR base line (red), and the long term by a channel with bands of 2 standard deviation width.
Apart from trend analysis is trading strategy. Again, lots of possible approaches here. One premise is buy low and sell high. But what is low and what is high? That depends largely on what picture you are looking at. To illustrate the point, look at SPY in these charts. On the monthly chart, SPY is nearing the top of the linear regression channel, so one might advise to take profits if long, or if looking for a place to put money to work, wait until a retrace to the bottom of the channel (a long way down). On the weekly chart, however, one could make the argument that we're already at the bottom of the channel.
What about IYR? The monthly channel is sideways, which pretty much means there is no trend, or that the trend changed from up to down and the lagging channel indicator hasn't caught up yet. The weekly chart is a clear uptrend, but price is getting close to the top of the channel so one looking to put money to work may want to look elsewhere if they are looking to avoid retrace risk.
What about TLT? Treasuries are commonly viewed as safety investments, but are they a good value here? Both the monthly and weekly charts show price reaching the top of the channel. That could just be another signal that the stock markets are overdone and the smart money is already in protected investments. From an unprejudiced view of the security itself as simply a diverse market, however, there is retrace risk in both monthly and weekly timeframes.
What about GLD? Right at the bottom of a monthly channel, it's either a screaming buy here, or a generational change in trend is underway.
Hopefully this provoked some thought, and happy trading.
There are nearly infinite ways of looking at the markets technically. I've decided to keep it simple with linear regression as the most basic representation of trend. Each chart has a long and short term linear regression trend. The short term is represented by a simple LR base line (red), and the long term by a channel with bands of 2 standard deviation width.
Apart from trend analysis is trading strategy. Again, lots of possible approaches here. One premise is buy low and sell high. But what is low and what is high? That depends largely on what picture you are looking at. To illustrate the point, look at SPY in these charts. On the monthly chart, SPY is nearing the top of the linear regression channel, so one might advise to take profits if long, or if looking for a place to put money to work, wait until a retrace to the bottom of the channel (a long way down). On the weekly chart, however, one could make the argument that we're already at the bottom of the channel.
What about IYR? The monthly channel is sideways, which pretty much means there is no trend, or that the trend changed from up to down and the lagging channel indicator hasn't caught up yet. The weekly chart is a clear uptrend, but price is getting close to the top of the channel so one looking to put money to work may want to look elsewhere if they are looking to avoid retrace risk.
What about TLT? Treasuries are commonly viewed as safety investments, but are they a good value here? Both the monthly and weekly charts show price reaching the top of the channel. That could just be another signal that the stock markets are overdone and the smart money is already in protected investments. From an unprejudiced view of the security itself as simply a diverse market, however, there is retrace risk in both monthly and weekly timeframes.
What about GLD? Right at the bottom of a monthly channel, it's either a screaming buy here, or a generational change in trend is underway.
Hopefully this provoked some thought, and happy trading.
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