Whenever in doubt, zoom out.
That’s the closest thing you’ll find to a cheat code in this business.
Traders and investors are always chasing the mythical “holy grail” of the market — the perfect indicator, the magic formula, the one signal that tells you exactly what’s coming next.
Spoiler alert: It doesn’t exist.
But if there were such a thing, it would look a lot like this: Pull back, look at the monthly candlesticks, and let the long-term trend tell you the truth.
These big-picture charts strip away the noise, the headlines, the day-to-day whipsaws — and leave you with the only thing that matters: direction.
Monthly Candles in Practice
Here’s a great example of using these monthly candlesticks to identify the direction of primary trends.
We’re looking at the NYSE Composite Index, which consists of the stocks that trade on the world’s most important stock exchange.
The trend here is up. It wasn’t always up. Sometimes it’s been down, like in early 2022, and sometimes the trend has been sideways, like in 2019.
But new all-time highs, like we’re seeing now, is a classic characteristic of an uptrend:
And you’re seeing the same thing in the Nasdaq Composite.
These are the stocks that trade on the Nasdaq. Just like the NYSE, you’re also seeing new all-time highs:
So what do we do with this information? How is it helpful?
Well, the first thing we want to do before making any trading or investing decisions is to identify the type of market environment we’re in.
As far as stocks are concerned, the data shows the trend is not down.
So we probably want to spend more time looking for stocks to buy than looking for stocks to sell.
But When Energy?
Not everything is going up and to the right.
Crude oil, for example, is going sideways at best.
The trend here for energy is not up. It’s more down than sideways even. But, at the very least, we can all agree it isn’t up:
So this chart helps us decide how we want to be treating energy and energy stocks.
Gold, on the other hand, continues to make new highs. The trend here is still absolutely up:
And so we perform this exact exercise for all asset classes.
We want to use this “cheat code” to help us identify the trends for all the major indexes, each of the biggest bellwethers, all of the sectors, and any of the most important commodities markets, like those mentioned above.
I have my list. And I encourage you to make your own list.
Every month, I go one by one, looking for the direction of primary trends for all of the world’s most important assets.
Line Charts Too
And, hey, not everything needs to be a candlestick chart.
Don’t be afraid to use monthly line charts to really clear out all the noise.
That’s what this is about, zooming out and smoothing the data.
Line charts are helpful for that as well.
Here’s a chart of the S&P 500 and the Nasdaq-100 both closing out the month at their highest levels ever:
There are no real hacks in this game. You have to put in the time, do the work, and look at the data.
But if there were a hack — if a true cheat code existed — this would be it.
Zoom out. Look at the monthly charts. Strip away the noise and see the bigger picture.
Whether you’re trading short-term swings or building a long-term portfolio, context is everything.
Knowing the primary trend keeps you aligned, keeps you sane, and most importantly, keeps you on the right side of the market.
And in this business, that’s the closest thing to a cheat code you’re ever going to get.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs