S&P 500: Both Bullish And Bearish (Depending On Your Time Frame)
Dragonfly Capital | Sep 23, 2014 07:59AM ET
Everyone has opinions, and traders are no exceptions. In fact most traders that I have worked with through the years have an opinion about everything. Social media has helped lend a voice to many of those opinions and causes confusion for many. One place to find that confusion is in something that should be straightforward, like technical analysis of stock price action.
The chart above of the S&P 500 ETF (ARCA:SPY) since May 2013 is a good example of how it is often not so simple. Most people would look at this and see a rising channel that has contained the S&P 500 over this time frame. A bullish picture. And for the bulk of investors this is the proper view. A bullish market.
But not every trader is an investor. By that I mean that there are a variety of traders. The spectrum runs from High Frequency Trading algorithms that hold stock for a few seconds, to day traders who never hold a position overnight, to swing traders that may hold a stock for a few days to a couple of weeks, to position traders that may hold stocks for weeks or months or longer, and finally investors with a very long focus. And each would view this chart differently. The long term channel higher would cover the investor and possibly the position trader. But you will need to focus on most recent price action, from mid August onward, for the swing and day trader.
Looking at it again above, the swing trader might see the price action as sideways, or consolidating. For them the price reached a new high and has been churning in a range between 198.30 and 202 since. And the day trader might see the action as Bearish with the strong moves lower over the last two days shown.
So who is right? They all are, for their time frame. And that is a very important point. You need to understand someone’s time frame before you can understand their point of view or think about applying their knowledge to your situation.
Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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