Founder’s Note: Our man Down Under is enjoying the benefits of the Southern Hemisphere right now, including the fact that he can get ready to play golf while we’re up here just trying to not freeze.
Grant Hawkridge is always constructive, and he always provides a joyful and useful read on Saturday.
Here’s Grant with something to think about as January ends and February begins… – JC
By Grant Hawkridge
G’day, Grant here again.
Over the last three weeks, I’ve been preparing for the club championship that starts this weekend at my golf club.
It’s the most important intra-club event on the calendar. Four rounds, 72 holes.
Preparation has been the focus.
I’ve spent time with my golf coach working on my driver, trying to hit the ball longer and straighter, with fewer big misses.
Between sessions with my coach, I’ve been down at the range working on strike consistency with my irons.
Repetition. Same swing, over and over.
I’ve also spent hours on my short game. Chipping. Putting. The unglamorous stuff that saves shots when things are not perfect.
Now the preparation is finished.
The next part is simple. I line up against the rest of the club this weekend and let the preparation do its job.
If the preparation carries over, the result usually takes care of itself. If it does not, I find out quickly where I need to keep improving for round two.
Either way, the process is the edge.
That same idea carries straight into markets.
Preparation Happens Before the Trade
Trading preparation happens before the price starts moving, not while it’s moving.
One of the most valuable things JC taught me over the years was his cheat code.
He studies the monthly charts.
We only get 12 monthly candles each year. That’s it – 12 data points. Not many. That constraint is the feature, not the flaw.
Monthly charts force you to slow down. They strip away the day-to-day noise. They make it harder to overreact. They make it easier to see the direction of the primary trend.
We do not want to fight primary trends. That is one of the fastest ways to lose money in this game.
My monthly routine is not quick. I go through more than one hundred charts. Indexes. Sectors. Regions. The list changes over time. Some charts stay. Others get replaced. The chartbook is never finished.
That work gives me a map for the months ahead.
That’s my market preparation at the start of every month.
It is not exciting. It is not fast. But it puts the odds in my favor before I risk my money.
Now I want to share three of the most important monthly charts that stood out in my latest review and what they’re telling me right now.
What Stood Out in My Monthly Prep
After working through my monthly chartbook, three charts stood out immediately.
Not because they were flashy, but because they all tell the same story from different angles, and they do it on the timeframe that actually matters for the primary trend.
The Dow Jones Industrial Average just closed January at fresh monthly all-time highs, marking nine straight up months on a closing basis:
Monthly trends don’t extend like this by accident, and they rarely roll over quietly without first showing signs of stress
What stands out is how price has behaved around former highs.
Each breakout has been followed by digestion rather than rejection, with pullbacks staying contained and buyers stepping back in before momentum can unwind.
That behavior keeps the trend pointing higher.
If this were a tired move, the monthly chart would look different, but price continues to resolve higher, which keeps the bull market argument on solid footing.
As long as major indexes like the Dow are closing at new highs on a monthly basis, it’s hard to argue that the primary trend is under pressure.
Emerging markets just broke out of an 18-year base to fresh monthly highs. You don’t get moves like this without investors leaning into risk:
Money doesn’t rotate into emerging markets when investors are looking for safety. This is one of the first places money pulls back from when risk appetite fades.
Seeing the iShares MSCI Emerging Markets ETF (EEM) break out on a monthly basis tells us investors are willing to move further out on the risk curve.
It becomes very difficult to argue for a defensive backdrop when global equities are resolving higher from an 18-year base.
Energy is telling a similar story from a different angle.
The State Street Energy Select Sector SPDR ETF (XLE) just broke out of an 11-year base and closed January at fresh monthly all-time highs, with the January candle up more than 14%:
That kind of move carries weight on a monthly chart.
Long bases exist because markets spend years working through excess supply and weak demand. Breaks from ranges that took years to build rarely stop after one big candle.
Energy leadership is not defensive behavior.
Breaking out of an 11-year range means money is rotating, not pulling back.
A monthly breakout after more than a decade tells you risk appetite is still there, even after a strong run in stocks.
This is why preparation happens before the month begins, not after the move is obvious. Monthly charts slow you down. They remove the noise and force you to deal with the primary trend as it is, not as you feel about it.
Right now, that map still points higher. The major trends remain intact, participation continues to broaden, and leadership is expanding rather than contracting.
That’s what preparation is meant to uncover, before the pressure is on and decisions get harder.
Happy hitting🏌️⛳,
Grant Hawkridge
Quantitative Analyst, TrendLabs