- This is a simple game.
- But the rules are crucial.
- Ignore them at your peril.
Asset prices trend. That we know.
Market returns aren’t random. We all have the data.
That’s why technical analysis works. Real technicians spend their time studying price, identifying those trends, and positioning to profit from them.
Now, to be clear, not all “technical analysis” is created equal. There are plenty of pretenders out there – people fighting every move, calling tops at every tick.
That’s not technical analysis. That’s nonsense.
The real work is about respecting the primary trend. And when it comes to fighting those trends, there are rules – three of them, simple but crucial.
Ignore them at your own risk.
My 3 Rules for Fighting Trends
- Rule No. 1: Don’t do it.
Seriously. Don’t fight trends.
Your job as an investor is to ride them, not stand in front of them.
- Rule No. 2: If you absolutely must, you better have a damn good reason.
The evidence has to be overwhelming – so clear that ignoring it would be irresponsible.
And if there’s a better trade somewhere else, take that instead. Don’t pick a fight just for the sake of it.
- Rule No. 3: If you go against the trend, define your risk to the penny.
Know exactly where you’re wrong, and what the market has to do to prove your thesis invalid.
Without that, you’re not trading, you’re gambling.
Break these rules, and the market will chew you up.
Remember: Asset prices trend. A stock breaking out to new highs is far more likely to keep climbing than to suddenly collapse. Fighting the trend is a losing game.
Remember when all those people lied to you about how it was only seven stocks that were driving this market? They weren’t counting. They were fighting trends.
And they were wrong.
Meanwhile, here’s reality: The Equal-Weight Dow Jones Industrial Average (EDOW) and the Equal-Weight S&P 500 (RSP) just closed the week at their highest levels ever.
That’s not “just seven stocks.” That’s broad participation. That’s a bull market.
This is because the trend for stocks is up. It has been up.
The folks who decided to fight this trend – for stupid reasons like the economy or valuations – have suffered the consequences.
Meanwhile, the investors who respected price action and ignored the noise have been rewarded.
They didn’t laugh at earnings estimates because they were smug. They laughed because price trends are what actually pay.
So here’s the bottom line: If you want to fight this trend, don’t.
If you insist on doing it, you better be damn sure. And you better know exactly where you’re wrong.
One day, the data will tell us the trend is lower.
That day is not today.
Today, the path of least resistance is still higher.
Respect it – or risk getting run over by it.
This Week in Everybody’s Wrong
On Monday, we explained how we’ll find our next Supernova Trade.
It’s a simple, three-step process.
All you need is a little patience, and the market will make you a lot of money.
On Tuesday, we talked about an old saying on Wall Street: “Sell Rosh Hashanah, buy Yom Kippur.”
Equity indexes ripped higher in September, which is usually one of the worst months for the stock market.
That’s a strong signal for the rest of the year.
On Wednesday, we celebrated a new set of fresh monthly candlesticks.
It’s impossible for me to overstate how important fresh monthly candlesticks are to our process.
This only happens 12 times a year…
On Thursday, we made the bear case.
One simple ratio will tell us just about everything we need to know.
Here’s the message right now: The path of least resistance is higher.
On Friday, we took a look at Bitcoin closing the third quarter at its highest levels ever.
The trend is still up, and price keeps proving it.
And yet people keep forgetting the only thing that actually matters.
On Saturday, Senior Analyst Jason Perz exposed the hidden power behind the AI revolution.
Indeed, surface stories excite investors, but second-order effects create real opportunities.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs