Founder’s Note: Grant Hawkridge is the guy we turn to when we need the answer to a hard question.
It’s not just because he’s our quantitative analyst, though of course that’s a big part of it.
But he’s here because he understands the value of a plan and a process and that price is the only thing that pays. – JC
By Grant Hawkridge
G’day, Grant here again.
I figured out pretty early that I’m a visual learner.
Long explanations never stuck the same way charts did. If I could see something mapped out in front of me, it made sense.
Patterns connected faster than paragraphs ever did.
That’s probably why technical analysis resonated with me so quickly.
When I first watched JC walk through a chart, it wasn’t about predicting the future. It was about making behavior visible.
Buyers and sellers were no longer abstract ideas. I could see who was pressing, where they stepped in, and where they backed off.
Charts don’t tell us what will happen next. They tell us what’s happening right now and who’s in control.
Once I started to see charts that way, the questions changed.
What Charts Actually Tell Us
The debate about whether charts predict the future never dies.
It misses the point.
Charts are not prediction tools. They are positioning tools.
They tell us who’s pressing. They tell us where we’re wrong. They tell us when the market environment changes.
That’s the edge.
Here’s what that looks like on a chart.
The Path of Least Resistance and Where We’re Wrong
When price prints higher highs and higher lows, buyers control the market. When lower highs and lower lows stack up, sellers are pressing.
But control isn’t just about trend direction. It’s about behavior inside the trend.
In strong markets, pullbacks stay shallow and get absorbed quickly. Dips don’t hang around. Buyers step in before price can break key levels and push it back toward highs.
In weaker conditions, rallies stall early and supply shows up faster than demand. Price struggles to reclaim prior highs and loses momentum near obvious levels.
We don’t need a headline to interpret that. We can see it in how price behaves around prior highs, breakout levels, and major moving averages.
That’s where real transactions took place. That’s where participants agreed on value – and where that agreement can break.
Every trade needs a line that says, “If price gets there, I’m wrong.”
Our job is not to predict the next move. Our job is to recognize the primary trend and define risk before we press the button.
Look at the S&P 500 over the past three years:
Price has stair-stepped higher. Each breakout has been followed by consolidation.
That’s how a healthy trend behaves.
Higher highs. Higher lows. Controlled pullbacks.
Right now, price is compressing just below 7,000. That level has capped the advance for the moment, while 6,500 marks the most recent important low inside this range.
If price pushes through 7,000 and holds, the pattern of higher highs continues. And the primary trend stays intact.
If price breaks below 6,500, the series of higher lows gets disrupted. That changes the market’s character and forces a reassessment of the trend.
We don’t need to predict which scenario plays out. We need to know what shifts the odds.
Environment and Leadership
Not all markets behave the same way.
Trending phases reward breakouts and expand leadership. Ranges compress price and rotate leadership. Downtrends shrink opportunity and punish hesitation.
If we trade every environment the same way, we end up giving money back.
This is where relative strength becomes important.
Look at consumer staples relative to the S&P 500:
In strong, risk-on environments, defensive sectors usually lag. Money moves into growth names.
When the market slows and conviction fades, defensive groups start to gain relative ground.
Right now, consumer staples are outperforming while the S&P 500 is consolidating just below 7,000. The index is flat year to date and trading sideways within a clear range.
Staples gaining relative strength during consolidation doesn’t confirm a breakdown. But it does tell us that money is rotating toward defense rather than expanding into higher-beta plays.
Outperformance during expansion is leadership. Outperformance during compression often signals caution.
Relative strength only makes sense in context. The index isn’t breaking down, but it isn’t accelerating, either. Defensive rotation inside a range fits that environment.
Relative strength doesn’t predict the next move. It helps us understand the tone of the current one.
Under the Surface
A range can still have opportunity.
The S&P 500 is consolidating under 7,000. Staples are outperforming while that happens. That is a defensive tilt inside a sideways market.
This is where breadth keeps us honest.
The NYSE Advance–Decline Line is at an all-time high:
So even with the index going nowhere and defense gaining relative strength, the count of advancing stocks keeps growing.
That’s not what we see when the market is narrowing and rolling over. That is what we see when participation stays alive under the surface.
This also explains why there are still trades out there.
Index-level chop can hide a lot of trending charts. Breadth at new highs tells us the bench is still deep, even if the S&P 500 is stuck and leadership is rotating.
If this market were weakening, this line would roll over first. It isn’t doing that.
So the message is mixed, but it isn’t bearish.
The index is digesting. Defense is leading on a relative basis. Breadth is still pushing higher.
That combination keeps the bull case on the table, and it keeps stock pickers busy.
What It Comes Down To
Charts don’t forecast the future. They make positioning visible.
The real edge comes from reading what’s in front of us without forcing an opinion onto it.
If price is trending higher, do we accept that buyers are in control? Or do we fight it because of what we think should happen?
If a level breaks, do we respect that information? Or do we look for reasons to dismiss it?
If participation narrows or momentum shifts, do we adjust? Or do we stay anchored to our bias?
Charts are simple. The discipline required to read them honestly is not.
We can’t control the outcome of the next move.
We can control whether we are aligned with the trend, whether our risk is defined, and whether we understand the environment we are trading in.
The chart gives us the information.
Whether we act on it honestly is up to us.
Happy hitting🏌️⛳
Grant Hawkridge
Quantitative Analyst, TrendLabs