I get it – the constant back-and-forth about bull or bear, strong breadth or weak breadth, rotation or distribution can wear you down.
It’s the same debate every cycle, usually with many of the same characters making similar arguments. And for most people, it’s exhausting.
But for me, it matters. This is my job. I’m in the business of making money in the market, and the very first step is knowing exactly what kind of market we’re in.
Only then can we choose the right tools, the right strategies, and the right mindset for the environment in front of us.
The Ability To Adapt
If your system can’t adapt to a changing market environment, it’s guaranteed to fail.
You hear people proudly declare they “only trade growth stocks.” Great – until growth stocks fall out of favor.
Same story with the “Oil & Gas experts” from 20 years ago. A lot of them never left that space, and many spent decades trapped in Oil & Gas hell simply because they couldn’t – or wouldn’t – adapt.
The same fate eventually awaits today’s “Growth Gurus.”
And that’s before we even get into sector rotation or relative strength. Even at the broad market level, environments shift dramatically:
- Sometimes you get strong, clean uptrends with low volatility – like the U.S. in 2017.
- Sometimes markets weaken as more stocks and sectors trend lower – think most of 2021 into 2022.
- And sometimes you get those sideways, messy slop-fests – late 2014 through mid-2015 comes to mind.
A trading or investing system – regardless of time horizon – must recognize these shifts and adjust accordingly.
At TrendLabs, that adaptability was a core design principle from day one.
It’s non-negotiable.
It’s step one in everything we do.
Do You Brush Your Teeth With a Hammer?
In life, we use different tools for different situations.
When it’s time to brush your teeth before bed, you’re not reaching for the hammer in the toolbox. You grab a toothbrush.
If my wife asks me to hang a mirror, I’m not heading upstairs to find my toothbrush either. I’m telling her to call the maintenance guy!
He might grab a drill or a hammer – but probably not a toothbrush.
Same principle in markets.
Different environments require different strategies. If we’re in a low-volatility, trending bull market, a strategy built for high-volatility chop is going to get smoked.
And in a high-volatility bear market? Those calm, trend-following bull-market tools are going to struggle just as badly.
The job is simple: Identify the environment first, and then choose the right tool for the job.
What Environment Are We in Today?
Just like any other point in any cycle, our job is to identify the environment we’re in right now.
We’re never going to know with perfect certainty, but we weigh the evidence, stack the probabilities, and put ourselves in the best position to win.
By our math – and contrary to much of the noise out there – this is a healthy, broadening, uptrending bull market.
And historically? In bull markets, the people who own stocks make a lot more money than the people who don’t… or worse, the people shorting them.
And no, we’re not calling this a bull market because “it’s up 20%.” We’re not using some lazy new-high/new-low ratio either.
The real way – the only way – to know what’s happening is to actually do the work: Go one by one through every stock and ask, “Is it going up, sideways, or down?”
Almost nobody does this. Humans have a weird obsession with shortcuts. They’ll spend years trying to hack the system instead of spending an hour counting.
Yes, we quantify the data. Yes, we use our proprietary NOW Score. But nothing replaces the clarity that comes from looking at every chart yourself.
And here’s what that process shows today:
- Most global markets are making new highs – and it’s not fewer countries, it’s more than at any other point this cycle.
- Back in the U.S., more than 62% of NYSE stocks are in uptrends (above their 200-day moving average).
- Small caps? The Russell 2000 is on pace for the highest monthly close in its history.
- Micro caps – the most speculative corner of the market – are breaking out too.
- Biotech is hitting multi-year highs.
That’s not risk aversion. That’s risk appetite. Loud and clear.
So what does that mean for us? What do we do with this information?
Simple: We spend our time looking for stocks to buy, not excuses to sell.
We’ve been pressing the gas – and the road is wide open.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs