Jack The Trader: Weekend Thoughts and Market Direction

Every weekend I take a step back and review the mid and long term charts of the major indexes to gain an understanding of the overall market direction. In my opinion we are still in a bull market but with the current pull back are getting very close to a change in direction. This next week should tell us if this pull back was a correction in the bull market and prices head higher or if we have a change in trend and prices continue to head lower.

The charts below are my mid term and long term charts for the major indexes. If the blue line is above the green line on the mid term charts that tells me we are in a medium term up trend. If prices are closing above the blue line on the long term charts than we are in a long term up trend. When both of these charts agree on direction then buying stocks and ETF are a good idea.

As you can see in mid term charts the the blue and green lines are starting to turn down. On the long term charts the closing price is getting very close to falling underneath the blue line. This is what gives me cause for concern that we are approaching a change in direction. Again, this next week should reveal which way the markets are headed.

The last chart in this series is a 10 year chart of the S&P500. When the monthly closing price is above the blue line it is a good time to be invested in stocks and ETF's. Take a look at this chart and see how accurate this indicator is. How much better would your portfolio perform if you were invested only when the monthly closing price was above the blue line?

Dow Jones Industrial Average Mid Term Chart