There’s great value in sometimes taking a step back to observe.
It’s like the great philosopher Yogi Berra said: “You can observe a lot by just watching.”
If you know anything about baseball, you know it’s a bad idea to shake off the sign your catcher’s giving you.
I’m a pitcher, and I learned a long time ago to listen to my catcher. I encourage you to listen to Yogi. He’s the GOAT. A winner.
Take a step back. Observe. Watch.
It will become quite obvious very quickly that some people are crazy.
Especially now: People are panicking about the stock market. It’s extreme.
If you’re prepared – and you have some perspective – this is very good news.
It’s Crazy Out There
As I’ve said this week, the highs from the prior cycle literally define this bull market.
Here’s another update on the Dow Futures chart I shared Wednesday morning:
The gray line used to be “resistance” – that’s the red arrow at left.
There were more sellers than buyers then. But we broke through that resistance – buyers took control.
The Dow Futures keep bouncing at the exact level where they topped back in early 2022. See the green arrow.
The Nasdaq and the S&P 500 are doing the same thing.
Now we’re testing whether that prior resistance can become support. Are there more buyers than sellers here?
So far the answer is “yes.”
My research team has been following other key indicators this week too. And extremes and opportunities are developing right in front of us.
A massive back-to-back price drop last Thursday and Friday indicated we’d reached a market bottom coming into Monday.
By Tuesday, we were thinking this volatility spike might present an opportunity to buy when others are feeling fearful.
Sure enough, we saw extreme levels of market breadth on Wednesday. More than 50% of the stocks in the S&P 500 were “oversold.”
That’s a level we haven’t seen since the COVID Crash in 2020. It’s another potential signal of the end of the sell-off.
We determine what is “oversold” or “overbought” using the 14-day Relative Strength Index indicator, or RSI. “Oversold” means an RSI below 30.
The market took off, gaining 9.5% – the third-best day in the history of the S&P 500.
Not for nothing, of course, I was hanging out with my favorite market indicator of all time, my Mom.
The 9.5% move to the upside for the S&P 500 is what we’d call a “momentum thrust.” And it means good things.
On average, the market is up one year after a momentum thrust. And it’s higher 94% of the time following the days with the largest daily percentage changes.
Momentum thrusts like the S&P’s 9.5% move can signal the start of the more important breadth thrusts.
And we did see our first breadth thrust of 2025 – the NYSE Up Volume Thrust. It was relatively short. But it still indicates bulls are present and ready to work.
There was no follow-through on Thursday, though. The bullish signs are starting to add up. But this remains a challenging environment.
That’s why it’s a good time to take a step back.
What To Do About All That
Miami is fantastic this time of year. I was happy to be back.
And I wanted to share a few things I’ve been thinking about while I’ve been here.
One thing that certainly stands out is just how great it is to take a step back.
I’ve been through multiple life-changing liquidity events over the years.
I can tell you for a fact that composure, consistency, and respect for the process have helped me come out of them in good shape.
Having a great team in place has been extremely helpful, of course.
I’m fortunate. I’m not perfect. Far from it, in fact.
That’s why I keep it simple. It’s like I often say: I trust price, the bond market, and puppies.
Another thing I’ve learned is to keep the most important things in perspective.
Health. Family. Business. I learned that from Dr. Phil Pearlman.
Take a walk on the beach. Jump in the ocean. Hug your family.
Take a step back. Observe. Watch.
I’m back from Miami…
And I’m ready to roll with the market and profit from other people’s lack of perspective.
Are you with me?
Stay sharp,
JC Parets, CMT
Founder, TrendLabs