It was only a week ago that The Wall Street Journal was telling your parents that we were headed for the worst April since the Great Depression.
It didn’t turn out that way.
In reality, the S&P 500 and the Dow Jones Industrial Average ended April on seven-day winning streaks.
The S&P 500 recovered from a decline of nearly 14% over the first five trading days of the month to close down just 0.8% for April.
The Nasdaq Composite was down more than 14% but actually closed with a gain of 0.9%.
Papa Dow bounced back from a 13% slide to start the month to finish with a loss of just 3.2%
And we just got a fresh set of monthly candlesticks.
These are major data points for our process. We only get to look at fresh monthly candlesticks 12 times a year.
This set shows multiple U.S. indexes turning former resistance at their prior-cycle highs into fresh support…
I Still Refuse To Fight Papa Dow
Yesterday was April 30, the last day of the month, which means we get new monthly candlesticks.
Take a look at Papa Dow:
Notice how former “resistance” – where the chart stops going up due to more selling pressure than buying pressure – keeps turning into “support”
That’s where the chart stops going down due to more buying pressure than selling pressure.
We call this behavior “polarity.” And it’s the building blocks for supply and demand dynamics. It starts here.
The bottom line is that if the Dow is above its prior-cycle highs, then this bull cycle is still intact.
And if this bull cycle is still intact, we want to spend our time looking for stocks to buy and putting money to work from the long side.
These are complete monthly data points, and now we can move forward.
There are a lot of shenanigans that take place among institutional fund managers – “window dressing,” they call it – at the end of each month.
Month’s end is when they’ve got to show what they own to their investors.
Sometimes they don’t want to show what they own because they’re embarrassed to share that they were in the wrong stock.
Hence the end-of-month shenanigans.
What we can do now with monthly closing prices is take a step back and really zoom out.
That’s the beauty of these monthly candlesticks: the big-picture perspective. And we only get to do this 12 times a year.
We have no choice but to identify the primary trend. And this is how we start to do it.
This is a special day. I get very excited when we get all this new data.
It’s like Christmas for me.
Get Yourself Out There
We’re so grateful for news people and their uncanny ability to mislead the households who are turning to them for help and for hope.
Thank you for crushing their dreams and providing profit opportunities for the rest of us.
I’ve been doing this for more than 20 years, and I didn’t come up with this stuff by myself.
All the things you guys hear me talk about, I learned by going to dinners and happy hours and actually doing and living it.
I had a great day doing that in New York City on Tuesday.
It was another reminder to get outside, to go meet people, to speak to investors, and to talk to smart traders.
I had a lot of different meetings with traders of all ages and experiences.
Wound up at a speakeasy late at night, you know, talking with one of our coders who runs backtests for me.
This is my man in Nova Scotia. He lives in a fishing village, is what he calls it. And he just runs backtests for me.
I had some other friends who are traders in town sharing ideas.
This is not just something I do.
It’s really a lifestyle, right? And it’s great to have friends that I can share ideas with.
I just want to just remind everybody, you know, try, right?
I’m telling you, it’s so worth it.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs