This is all you need to know about the stock market right now: Don’t fight Papa Dow.
Former resistance is turning into support – just like they draw it up.
This is what they teach you in Technical Analysis Kindergarten.
Before you could even read, they’re lecturing you about resistance and support.
We call that polarity. We’ve written about it a lot recently.
You’ll get used to me referencing former resistance turning into support and polarity… again and again and again.
It’s not because we’re working some kind of magic. It’s simply how supply and demand works.
And hearing it again and again and again is how I learned it.
You could fight Papa Dow.
You could also cook a steak in a microwave.
The Godfather of Technical Analysis
“Don’t fight Papa Dow” comes from one of my mentors, Mr. Ralph Acampora.
This chart explains why I don’t fight Papa Dow anymore:
What’s going on here is, the Dow Jones Industrial Average is finding support at former resistance – the principle of polarity is in play.
These are the prior-cycle highs. What happened was, in late 2021, early 2022 the last bull market ended.
And then, of course, all those ARK stocks got destroyed. Chinese internet stocks got destroyed. Everything and anything solar got destroyed.
And, of course, eventually we got out of it.
Semiconductors led the way up. Things got better.
The Dow was making new all-time highs, now it’s come off from those levels. It’s causing some problems in the market.
But – from a bigger-picture perspective – Papa Dow is still above the prior-cycle highs.
You know what we call that around here?
We call that “higher lows and higher highs.” Another word for those is “uptrends.”
And I’ve done the math: In bull markets, you tend to see a lot of uptrends.
My friend Ralph is a legend in the field of technical analysis.
And he used to always tell me, “JC, don’t fight Papa Dow.”
Here’s Ralph and me way back in 2013:
Ralph would tell me – over and over and over again – “Don’t fight Papa Dow, JC.”
Because you know what I was doing at the time.
I was constantly fighting Papa Dow. I was. I really, truly was. I was in my 20s. I thought I knew everything, right?
“Look at me,” I thought. “I know everything.”
I literally thought I knew everything in my late 20s. And I was like, “Oh, the real institutions follow the S&P 500. That’s the real index for the pros.”
And I’m a pro. Because I’m wearing a suit in Midtown Manhattan, right?
And they put me on TV sometimes, right?
So I have to be important.
What an idiot I was.
I’m telling you – from the bottom of my heart – what a fool I was in my late 20s…
Thinking how cool I was, the S&P 500 and institutions and “that’s their benchmark, bro.”
Turns out I didn’t know anything.
Yes, Ralph was right all along.
Don’t fight Papa Dow.
That’s it.
Don’t fight Papa Dow.
A Lesson You Have To Learn
Stock prices don’t move because of the fundamentals of the company.
It’s about whether there’s more demand for that stock or supply at those prices.
That’s what it’s all about. That’s what we’re analyzing here, guys: Supply and demand.
The bottom line – I’ve said it before, I’ll say it again – if we’re above those prior-cycle highs, bull market on.
I ain’t fighting Papa Dow. I won’t do it.
You could fight Papa Dow if you want to. I don’t recommend it.
You could also heat a steak in a microwave, for example. You could.
I don’t recommend it. Cast iron or perhaps a really hot grill. But don’t put it in the microwave.
Oh, the S&P 500, the institutional benchmark all the cool kids follow?
Same thing.
Former resistance is turning into support at the prior-cycle highs.
This suggests that buying stocks is the best thing to do. That’s what we’ve been doing over the past couple of weeks.
That’s what we did this week.
We have our plan. And we’re sticking to it.
I refuse to fight Papa Dow.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs