I always tell new users of technical analysis to stick to the basics, and the very first thing I teach them is to learn the definition of what is a bull trend and what is a bear trend. The definition of a bull trend is for higher reaction highs and higher reaction lows and to my mind the S&P is no longer in a bull trend.
If you look at the above daily chart all I have done is add a simple 55-day ma to it and if you had done nothing else but buy dips to this and hold long positions you would have done well all year....but hang on a minute, price went below the 55-day ma in March - it did, but what it DID NOT DO is take out the previous low, therefore it was still in a bull trend.
The reason why it is different this time is not only have we closed below the 55 day ma BUT we have also broken below the previous reaction low. Extreme caution is warranted in my opinion..in a bull market you buy the dips but I suspect that we are no longer in a bull market, we are doing something different.
If you look at the above daily chart all I have done is add a simple 55-day ma to it and if you had done nothing else but buy dips to this and hold long positions you would have done well all year....but hang on a minute, price went below the 55-day ma in March - it did, but what it DID NOT DO is take out the previous low, therefore it was still in a bull trend.
The reason why it is different this time is not only have we closed below the 55 day ma BUT we have also broken below the previous reaction low. Extreme caution is warranted in my opinion..in a bull market you buy the dips but I suspect that we are no longer in a bull market, we are doing something different.
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