In this edition of the GoNoGo Charts show, Alex and Tyler take a top-down approach to the technical market environment following the SVB collapse and the Fed’s 25bps hike. A GoNoGo Cross Asset Heat Map helps understand the intermarket factors that could impact equity performance. Treasury rates ($TNX), the US dollar (UUP), and oil (USO) are all falling in NoGo trends. Very recently, gold (GLD) and Bitcoin (BTCUSD) rallied into Go trends. Digging into the equity sectors, Alex and Tyler review the relative outperformance of technology, and then within the tech sub groups the strength of semiconductors. This leads to a discussion of $NVDA that is hitting new highs. Finally, Alex and Tyler discuss the situation with regional banks and the financial sector, with commentary on how best to use GoNoGo Charts from a risk control perspective.

This video was originally recorded on March 23, 2023. Click this link to watch on YouTube. You can also view new episodes – and be notified as soon as they’re published – using the StockCharts on demand website, StockChartsTV.com, or its corresponding apps on Roku, Fire TV, Chromecast, iOS, Android, and more!

New episodes of GoNoGo Charts air on Thursdays at 3:30pm ET on StockCharts TV. Learn more about the GoNoGo ACP plug-in with the FREE starter plug-in or the full featured plug-in pack.

On this week’s edition of The DecisionPoint Trading Room, Carl starts off the trading room with a closer look at Regional Banks (KRE) and gives his opinion of not only the market, but the top ten capitalized stocks. Erin picks up with a discussion on how to find negative divergences using DecisionPoint analysis. She finishes with a sector deep dive into Consumer Staples (XLP) and Food Retailers and Food Products industry groups. Symbol requests finish out the program.

This video was originally recorded on March 27, 2023. Click this link to watch on YouTube. You can also watch this episode and other past episodes on the StockCharts on demand video service, StockChartsTV.com. Registration is free!

New episodes of The DecisionPoint Trading Room air on Mondays at 3pm ET on StockCharts TV. Past videos will be available to watch on demand. Sign up to attend the trading room live Mondays at 12pm ET by clicking here!

Friday:

Monday:

Over the weekend, our Daily covered 3 key ratios to help decipher the market action and the prevailing macro theme for the economy.

We started with the one between long bonds (TLT) and the S&P 500 (SPY).

All last week, long bonds outperformed the SPY with calls for recession. This week, so far, bond yields rose to 3.5%. While gold declined a bit along with semiconductors, WTI crude oil was up $70 a barrel and grains along with sugar prices rose. Looking at the TLT:SPY Monday, TLTs now are performing on par with SPY.

Recession fears over, hello stagflation?

Then, as if to support the stagflation theory, with yields rising and the indices in a trading range, silver continues to outperform gold.

Although silver prices also fell some, the ratio between silver and gold enters “inflation worry” zone.

For the 3rd ratio, we continue to look at the dollar to the Euro for clues. The dollar typically goes up when interest rates do. Yet the dollar declined against the Euro, now at 1.07.

So we have yields rising, silver outperforming, and the dollar declining.

Our Small Cap All-Stars Model had the best daily returns Monday after the bank issues began with good news. The Russell 2000 IWM could see a further bounce from here, yet remains stuck in a trading range. At least we are not seeing IWM head into recession territory.

Good news, market is optimistic about avoiding recession. Bad news, market has not dealt yet with the possibility of stagflation.

And then there is Bitcoin. Here’s a note on Bitcoin from Holden and his weekly Cryptocurrrency update:

The most likely scenario from here is that we’ll see Bitcoin go sideways for a short while in this new range until a new piece of major news comes out to force a break one way or the other. In the event of a breakdown from here, we would expect BTC to find support around the $25,000 level, while the clear target from here is to take out the psychological $30,000 level on a daily closing basis.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

IT’S NOT TOO LATE! Click here if you’d like a complimentary copy of Mish’s 2023 Market Outlook E-Book in your inbox.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish discusses long bonds, Silver to Gold and the Dollar in this appearance on BNN Bloomberg.

Mish sits down with Kristen on Cheddar TV’s closing bell to talk what Gold is saying and more.

Mish and Dave Keller of StockCharts look at longer term charts and discuss action plans on the Thursday, March 17 edition of StockCharts TV’s The Final Bar.

Mish covers current market conditions strengths and weaknesses in this appearance on CMC Markets.

Mish sees opportunity in Vietnam, is trading SPX as a range, and likes semiconductors, as she explains to Dale Pinkert on ForexAnalytix’s F.A.C.E. webinar.

Mish and Nicole discuss specific stock recommendations and Fed expectations on TD Ameritrade.

Coming Up:

March 30th: Your Daily Five, StockCharts TV

March 31st: Festival of Learning Real Vision “Portfolio Doctor”

April 3rd: Webinar with Bob Lang on Options Den

April 4th: The RoShowPod with Rosanna Prestia

April 24-26: Mish at The Money Show in Las Vegas

May 2-5: StockCharts TV Market Outlook

ETF Summary

S&P 500 (SPY): Needs to clear 400 and hold 390.Russell 2000 (IWM): 170 held, so maybe the ratios are implying no recession after all–180 resistance.Dow (DIA): 325 cleared now needs to hold.Nasdaq (QQQ): 305 support, 320 resistance.Regional Banks (KRE): Daily up reversal. Weekly more inside the range of the last 2 weeks.Semiconductors (SMH): Follow through on that key reversal w/ 250 support.Transportation (IYT): 219 is a level that has been like a yo-yo price.Biotechnology (IBB): Held key support at 125 area-127.50 resistance.Retail (XRT): Granny held 60; still in the game, especially since that is the January calendar range low.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Despite the gloom and doom and increased volatility, money seems to be moving into the stock market.  

On the surface, there is high anxiety in the markets. Certainly, the potential for more problems in banking remains well above average, as rumors surfaced late in the week suggesting Deutsche Bank (DB) may become the next European bank to fail. And although the problems in commercial real estate have been overshadowed by the banking crisis, there has not been a resolution to that issue either. All of which adds up to what may be driving the stealth positive money flows into stocks; expectations that the Fed is done raising rates.

Dueling Messengers and Unintended Consequences

It doesn’t get much stranger than this. On 3/23/23, after the Federal Reserve raised interest rates by a quarter point as expected, Chairman Jerome Powell, during his press conference, was able (for once) to keep the stock market from unraveling, as it often does when he speaks. Unfortunately, Treasury Secretary Janet Yellen did the job for Mr. Powell when she testified in front of the U.S. Senate and noted that there were no plans to increase deposit insurance funds to alleviate the banking crisis.

So while Powell’s press conference was reassuring, Yellen’s unexpected remarks triggered a 500+ point loss for the Dow Jones Industrial Average, which spread throughout the market. 

Interestingly, the treasury secretary reversed her comments on the following day. But the market’s message was clear, as the price chart for the KBW Bank Index (BKX) shows.

But one sector’s losses can create gains for others, which is what seems to be happening with homebuilders and technology stocks being the beneficiaries, as I describe below.

Bond Yields Tumble as Traders Factor in Recession Odds and Fed Easing

The stock market grabs the headlines, but the action in the bond market suggests that traders are increasingly betting on a recession and a Federal Reserve easing of rates in the U.S. The U.S. Ten Year Note yield (TNX) failed in its most recent attempt to rebound and, by week’s end was back below 3.5%.

This decline in yields will be felt through the economy, as related commercial rates (mortgages, auto loans) will follow. This is already evident in the housing market, as potential homebuyers have been quick to react to falling mortgage rates.

News Travels Fast: Existing Home Sales Surge as Mortgage Rates Fall

As I often write when describing the MELA system, news travels fast. That’s because most people are connected to the news cycle. Thus, when bond yield fell in December 2022, potential home buyers who had been on the fence took the plunge, and this is what led to the increase in existing home sales two months later. Here are the details:

South region — Sales in the South were the strongest. Overall, sales rebounded 15.9% in February from January to an annual rate of 2.11 million, a 21.3% decrease from the prior year. The median price in the South was $342,000, an increase of 2.7% from one year ago.Midwest region — Sales here were next, with a 13.5% increase from the previous month to an annual rate of 1.09 million in February, declining 18.7% from one year ago. The median price in the Midwest was $261,200, up 5.0% from February 2022.West region — Existing-home sales rose 19.4% in February from the prior month to an annual rate of 860,000, down 28.3% from the previous year. The median price in the West was $541,100, down 5.6% from February 2022.Northeast region — U.S. sales improved 4.0% from January to an annual rate of 520,000 in February, down 25.7% from February 2022. The median price in the Northeast was $366,100, down 4.5% from the previous year.

As you can see, the general regional trends continue, with prices remaining stable or rising in the South and the Midwest while falling in the Northeast and West. The number of houses sold in the South also continues to outpace the other three regions, as the Great Migration continues.

I discussed the long term investment potential in homebuilder stocks in my latest Your Daily Five video, focused on investing in Megatrends.

Homebuilder Megatrend Remains Intact

Homebuilder stocks continue to show significant relative strength. This strength is supported by field observation. In my own neck of the woods, the Dallas-Fort Worth area, the recent decline in mortgage rates has brought buyers off of the sidelines. A newly constructed townhome development near where I live had three vacant homes for the past two months as rates rose. Now, as rates have dropped, they are all under contract.

Other developments in the neighborhood and surrounding areas are also showing signs of rising activity as well. And the number of out-of-state license plates I see in my commute remains high.

Homebuilder stocks are core holdings at Joe Duarte in the Money Options. Check them out with a free trial to my service here.

Technology Stocks are Stealth Money Magnets

Just as homebuilders are in a good position, the technology sector is also gathering interest. The Van Eck Semiconductor ETF (SMH) is tracing a bullish trading pattern as investors focus their interest on longer-term issues, such as the reshoring of chip factories to the United States and the potentially positive effects of those moves to the U.S. economy.

Moreover, the continued expansion of data centers and communications-related activity is bullish for the chip sector, as servers, routers, switches, and related infrastructure are all powered by semiconductors. Note the bullish action in the price chart SMH, accompanied by a steadying of both Accumulation Distribution (ADI) and On Balance Volume (OBV).

Aside from the homebuilder and semiconductor sectors, there are other areas of the stock market which bear watching. I recently posted commentary on one key area which is being ignored by most investors at my Buy me a Coffee page. 

Bullish Money Flows are Taking Hold

Aside from the positive sector dynamics discussed above, the technical environment for stocks seems to be stabilizing following the prior week’s banking crisis-related negativity. The New York Stock Exchange Advance Decline line (NYAD) held just below the 200-day moving average, a key support level.

Meanwhile, the S&P 500 (SPX) remained above its 200-day moving average. On Balance Volume (OBV) and Accumulation Distribution (ADI) are starting to turn up on SPX, which is very bullish if it continues.

For its part, the Nasdaq 100 Index (NDX) continued to outperform SPX as money flows into technology companies persists. As in SPX above, there is a bullish uptick in both ADI and OBV, as short sellers bug out and buyers start moving in.

The CBOE Volatility Index (VIX) also rolled over, suggesting that bearish sentiment is decreasing.

When VIX rises stocks tend to fall as put volume rises, that is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in VIX is bullish as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures, raising the odds of higher stock prices.

Most importantly, the market’s liquidity also showed some improvement, as the Eurodollar Index (XED) remained above support between 94.5 and 94.75. A move above 95 will be a bullish development for sure. Usually, a stable or rising XED is very bullish for stocks. On the other hand, in the current environment, it’s more of a sign that fear is rising and investors are raising cash.

You can learn more about how to gauge the market’s liquidity in this Your Daily Five video.

To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

Ultimately, breaking out above the August 2022 high represents the key level to reverse the downtrend that began in early-January 2022. I like to use longer-term charts to determine whether we’re currently trending higher or lower, and right now the downtrend is firmly in place:

The numbers on the above chart identify the lower highs and lower lows that remain in play. Until we clear that August high, the price chart remains bearish. The problem is that if you wait until the long-term price chart turns bearish in a cyclical bear market (January through October 2022), you ride at least half, if not more, of the downtrend. The same holds true when bottoms form. If we’re waiting for price confirmation – clearing overhead price resistance a little below 340 – we will have missed the first 30% or more of the move higher.

That’s why I do what I do. The price chart only tells us so much. We must be aware of the “under the surface” signals taking place to truly understand the likelihood of a market advance of decline. Despite the clear downtrend on the chart above, I’m VERY BULLISH and have been since June 2022.

If you had $100,000 invested at the end of 2021 and you shorted the S&P 500 (bought SH) when we turned bearish at EarningsBeats.com, that $100,000 would have grown to nearly $125,000. On June 17, 2022, we called a market bottom. Investing that $125,000 in the SPY at that time would have grown to roughly $137,000 as of Friday’s close. That would be a total 37% gain in the last 15 months, while the S&P 500 still remains 16.7% below its close on December 31, 2021. That type of outperformance vs. the S&P 500 is life changing, when you further consider the compounding nature of investment returns.

I’ve spent the past several months explaining to our EarningsBeats.com members why I believe the stock market is heading a lot higher. There are a number of reasons from the positive divergence that appeared on the above weekly chart to extreme bearishness in the options world to serious accumulation by Wall Street. Throw in a very strong seasonal period that begins this week and you’ll begin to understand why I’m looking short-term at a breakout in the QQQ. We’ve been threatening and it wouldn’t take much buying from here to clear overhead resistance on the daily chart:

Given the “under the surface” bullish signals, I’m simply waiting for the price action to confirm what I already believe is an uptrend that will result in all-time highs for our major indices later this year or early next. It will be spurred by growth stocks as the 10-year treasury yield ($TNX) continues to move lower.

I’ll be featuring one industry group that will be a key leader during this next move higher. It’s on the verge of its own breakout, one that will help to carry the NASDAQ much, much higher. If you’d like to receive this chart, simply CLICK HERE and sign up for our FREE EB Digest newsletter with your name and email address. There is no credit card required and you may unsubscribe at any time.

Happy trading!

Tom

It was a volatile but largely quiet week for the markets. Over the past five sessions, the markets were able to defend their opening lows and were trading flat until the last trading day of the week. The negative closing of the last trading day saw the markets ending in the negative on a weekly note. The trading range was narrower; the NIFTY moved 378.90 points through the week. The index did end up slightly violating important support; however, it tested another important pattern support as well. The headline index NIFTY50 ended with a net loss of 155 points (-0.91%) on a weekly basis.

From a technical perspective, the index now rests at crucial levels. In the previous week, it had closed below the 50-Week MA. This week, the index slipped below the 100-Week MA which currently rests a 17076. However, it still has not violated the falling channel that it has formed. Presently the index is seen testing the lower edge of this falling channel. The coming week is a truncated one; Thursday is a trading holiday on account of Ram Navmi. Because of this, we will have monthly derivatives expiry a day earlier than usual. All in all, NIFTY still has an important support zone of 16850-17000 to defend; it will have to stay above this zone to avoid any weakness from further creeping in.

Monday is likely to see a shaky start to the week; the levels of 17100 and 17280 acting as likely resistance points for the markets. Supports will come in at 16850 and 16720 levels.

The weekly RSI is 38.82; it has marked a new 14-period low which is bearish. However, it remains neutral and does not show any divergence against the price. The MACD is bearish and remains below the signal line.

The pattern analysis shows that the NIFTY marked the most recent high at 18887; since then, while it stays in the corrective decline, it has formed a falling channel. Currently, the index has slipped below the 50-, and the 100-Week MA, but rests at the lower edge of the falling channel. In the process, the index has also dragged its resistance lower to 17300 from 17500 levels.

Overall, the market continues to rest at a crucial juncture. While some supports stay violated on the charts, the zone of 16850-17000 remains defended. As mentioned earlier NIFTY will have to keep its head above this zone to avoid getting weaker. While a shaky start to the week is expected, there are possibilities that the markets attempt a technical rebound while staying within the broad range. The defensive packs are likely to relatively outperform the broader markets. It is strongly recommended to maintain leveraged exposures at modest levels so long as NIFTY is below 17300 levels. A cautious approach is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed

The analysis of Relative Rotation Graphs (RRG) shows that this week we have PSE, Infrastructure, Auto, IT, FMCG, and NIFTY MidCap 100 indices in the leading quadrant. Although a few among these are seen paring some relative momentum, PSE, Infrastructure, and FMCG groups are likely to relatively outperform the broader NIFTY 500 Index.

The Nifty Financial Services index is inside the weakening quadrant. However, some improvement is seen in its relative momentum. Besides this, Banknifty, and PSU Bank index are seen moving inside the weakening quadrant as well.

The NIFTY Metal, Media, Services Sector, Commodities, and Energy groups are inside the lagging quadrant. These groups are likely to relatively underperform the broader markets.

The Pharma and Realty Indexes are inside the improving quadrant, but they are on the verge of rolling back inside the lagging quadrant. The NIFTY Consumption index stays firmly placed inside the improving quadrant and may put up a resilient show over the coming week.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

In this episode of StockCharts TV‘s The MEM Edge, Mary Ellen reviews the sharp decline in Banks and whether they’re ready to reverse higher. She also discusses broader market conditions while highlighting key pockets of strength and stocks showing promise.

This video was originally broadcast on March 24, 2023. Click on the above image to watch on our dedicated MEM Edge page on StockCharts TV, or click this link to watch on YouTube. You can also watch on our on-demand website, StockChartsTV.com, using this link.

New episodes of The MEM Edge air Fridays at 5pm PT on StockCharts TV. You can view all previously recorded episodes at this link. You can also receive a 4-week free trial of her MEM Edge Report by clicking the image below.

One of the best questions I got asked this week was “How can you be long gold and long semiconductors at the same time?” And I have a simple answer for that.

We love to take a position based on the macro, which is why gold has been so compelling. Nonetheless, the algorithms have also added up for semiconductors. Plus, the algos finally followed the macro analysis and told us to buy gold. So, it’s always a combination of art and math, with risk parameters the constant feature for both.

The market is in a very interesting spot right now. 3 ratios are telling us 3 different stories. The first ratio is the one between long bonds (TLT) and the S&P 500 (SPY). With long bonds outperforming the SPY, the calls for recession are all around. However, the softening of the yields also signals more QE and emboldens the growth stocks. And this is in the face of another rate hike by the Fed this past week.

Wait, there’s more.

The next ratio is the one between silver and gold.

Silver is outperforming gold, which is inflationary. Since it also means that silver, a more industrial metal, is good for the economy, it implies that there is not a recession on the horizon. Meanwhile, if silver continues to outperform, it also means demand for the metal is rising while supply may not be (hence the ratio). That means inflationary.

Add the TLT:SPY and the SLV:GLD ratios together, and you can see why this is such a hard macro environment to figure out. And why we love the math.

So far, recession and inflation at the same time, still means stagflation.

And then there is the dollar.

Although, historically, the dollar rising and gold rising have been known to happen simultaneously, we are looking at the dollar to the Euro for clues. The dollar typically goes up when interest rates do. But this past week, the dollar closed lower WoW.

Is the dollar sniffing a pause by the Fed? A currency crisis? An anticlimactic end to the banking issues with government rescues?

If any of those scenarios come to pass, it will continue to be great for semiconductors. And can still be bullish for gold and inflation. At 1.08, the dollar is nearly at par with the Euro.

Hence, this coming week, we will continue to watch what the bonds (closed unchanged WoW) do versus the SPY (closed higher WoW). We will see if silver’s performance (closed higher WoW) remains dominant over gold’s (closed unchanged WoW) performance. And, with news (on the backburner) about Iran, Russia, and China still a thing, we will watch the dollar and how it performs against the Euro. Any major continuation or shift in these 3 key ratios, should help us see not only the macro (more of an art) but also the sector strength (more about science).

One thing nobody can deny–the resiliency of the indices in the face of the persistent trading range.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

IT’S NOT TOO LATE! Click here if you’d like a complimentary copy of Mish’s 2023 Market Outlook E-Book in your inbox.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish discusses long bonds, Silver to Gold and the Dollar in this appearance on BNN Bloomberg.

Mish sits down with Kristen on Cheddar TV’s closing bell to talk what Gold is saying and more.

Mish and Dave Keller of StockCharts look at longer term charts and discuss action plans on the Thursday, March 17 edition of StockCharts TV’s The Final Bar.

Mish covers current market conditions strengths and weaknesses in this appearance on CMC Markets.

Mish sees opportunity in Vietnam, is trading SPX as a range, and likes semiconductors, as she explains to Dale Pinkert on ForexAnalytix’s F.A.C.E. webinar.

Mish and Nicole discuss specific stock recommendations and Fed expectations on TD Ameritrade.

Coming Up:

March 30th: Your Daily Five, StockCharts TV

March 31st: Festival of Learning Real Vision “Portfolio Doctor”

April 3rd: Webinar with Bob Lang on Options Den

April 4th: The RoShowPod with Rosanna Prestia

April 24-26: Mish at The Money Show in Las Vegas

May 2-5: StockCharts TV Market Outlook

ETF Summary

S&P 500 (SPY): Could be the start of shallower rallies, needs to clear 400 and hold 390.Russell 2000 (IWM): 170 held, so maybe the ratios are implying no recession after all.Dow (DIA): 325 key to clear.Nasdaq (QQQ): Still needs to clear the Feb high. 305 support, 320 resistance.Regional banks (KRE): 35 support, 44 resistance.Semiconductors (SMH): Could be the start of a key reversal w/ 250 support.Transportation (IYT): A weekly close under 219, so watch here for this week.Biotechnology (IBB): Held key support at 125 area.Retail (XRT): Granny held 60; still in the game, especially since that is the January calendar range low.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

2022 was a challenging year for investors, and, so far, the stock market in 2023 has had its fair share of challenges. The fallout of some banks came as a surprise to many investors; how can retail traders improve their trading results in 2023 in light of such unexpected events? That’s a question on every investor’s mind and involves several facets that range from tools and educational resources to behavioral biases. 

A recent conversation between Steve Lanzone of Bloomberg Radio and David Keller, CMT, our chief market strategist, sheds some light on how investors can better navigate the markets. It involves tools, educational resources, and behavioral biases. How can investors apply these different facets when investing? Let’s unpack.

A link to the interview is available at the end of this article.

Rotation Among Asset Classes

The stock market is never static. Sometimes, stocks outperform bonds, gold outperforms stocks, or commodities outperform stocks. And within stocks, sometimes Consumer Discretionary stocks outperform Consumer Staples, Technology outperforms Utilities, large caps outperform mid-caps/small caps, growth outperforms value, and so on. This is why it’s important for investors to be aware of these different rotations. If you start seeing growth stocks deteriorating, it may be time to comb through your charts to identify the areas of the market that are showing strength.

For example, during the banking fiasco in March 2023, banks got slammed, and investors moved their assets to other areas, such as the Technology sector, bonds, and gold. The chart below shows the ratio between the Technology Select Sector SPDR (XLK) and the Financial Select Sector SPDR (XLF). You can’t miss the steep rise from early March. This indicates that investors are moving into technology stocks such as Microsoft Corp. (MSFT), Apple Inc. (AAPL), Nvidia Corp (NVDA), and Salesforce, Inc. (CRM).

CHART 1: ARE INVESTORS TURNING TO TECHNOLOGY STOCKS FOR SAFETY? If you look at the performance of Technology to Financial, investors are pulling out of bank stocks and investing in technology stocks.Chart source: StockCharts.com. For illustrative purposes only.

Remember, during volatile market conditions, rotating in and out of different asset classes or sectors can equate to being an active trader. Nothing wrong with that, but it means you have to be engaged with the markets. One week can make a difference. So it goes without saying that you have to manage your risks, because small losses could lead to large losses.

If a stock or ETF has seen a significant decline, it may be tempting to pick it up at a bargain. But you’d be better off taking a step back and considering why the price is low.

Can you recollect a similar situation from the past?How did that trade work out?If you were to do it again, how would you trade it?

A stock or ETF may be well below its 200-day moving average, and if your criteria are to buy stocks above the 200-day moving average because, well, nothing good happens below the 200-day, you’re better off waiting on the sidelines.

Tackling Trading Emotions

One of the biggest challenges a trader faces is emotions. It’s much deeper than fear and greed. Within the realm of emotions are several biases, and one that often comes in the way of making sound trading decisions is confirmation bias. That’s when you find enough evidence to support your directional bias and convince yourself that your decision is correct—and because you believe your decision is correct, if the trade goes against you, you refuse to exit the position. It could end up being a losing position for far too long.

Another bias that investors face is endowment bias. That’s when you get emotionally attached to your positions. If you were attached to that big bank stock that you’ve been holding for years, your unwillingness to let it go may be silently hurting you. That stock doesn’t care if it hurt your feelings. Why should you hate to let it go?

These types of biases are part of human nature and changing them will take great effort. The market always wins. How can you come close to defeating it?

The 2023 stock market may be volatile, but that doesn’t mean trading opportunities don’t exist. Your best path to take advantage of the market is to establish a daily routine, make a checklist, and be disciplined.

Your Trading Game Plan

Here’s the view from Your Dashboard:

☑ Check the Market Overview (1). How are the US equity indexes performing? Scroll through the different indexes under the Equities tab and determine if they’re in an uptrend, trading sideways, or in a downtrend. View the charts in different time frames—intraday, daily, weekly, and monthly. Do all timeframes confirm the same direction? Are all indexes trending in the same direction, or are they different? What about bonds, commodities, and crypto? Having this big-picture view of the market is a great way to engage with the market.

☑ Check the Sector Summary (2). Know which sectors are the top and bottom performers. One day doesn’t make a trend, so it helps to look at a longer-term view. Click on Sector Summary at the bottom of the panel (3) and select a longer time period, such as three or six months, from the “period” drop-down menu. If, for example, Technology is the top-performing sector, select the Sector Summary for the Technology sector to identify the top sub-sectors. If semiconductors are at the top, select it from the Name column to see which stocks make up the semiconductor sub-sector. You can then sort these based on the different columns.

☑ Identify the strongest stocks or exchange-traded funds (ETFs). Consider the top three sectors and sub-sectors and add five to ten of the strongest stocks you find there to your ChartLists.

☑ Do your due diligence. Set up the charts with the indicators you prefer to look at and add trend-following indicators, breadth indicators, volume indicators, and volatility indicators. There are several indicators to choose from, so choose carefully, because you don’t want your charts to get too crowded. Use indicators that you understand well, and when you choose indicators, make sure they’re not redundant. You want to cover different facets of price action. Here are a few to consider:

Trend following. Trendlines, moving averages, average directional index (ADX).Breadth indicators. Advance-decline line, bullish percent index, McClellan Oscillator.Volume indicators. Relative volume (RVOL), negative volume index (NVI), on-balance volume (OBV).Volatility indicators. TTM Squeeze, average true range (ATR), Bollinger Band Squeeze®.

☑ Trading setup. Look through all your charts regularly and get to know all of them. Ask yourself if you’d be a buyer or a seller in the prevailing market environment. If you’d be a buyer, you want to buy into strength. Identify the industries, ETFs, mutual funds, and stocks that are outperforming the market.

Are they trending higher?Do they show strength?Do all indicators confirm a buy?Is the security showing increased participation?

If everything checks out, you may want to hit that buy button. If the stock acts the way you had hoped, ride the trade. But if you start seeing signs of price not going in your favor, be ready to sell the position. You never know how low a stock will fall. A $2 drop in price could drop another $2 the next day and continue heading lower. Your small loss could become a very large loss.

The Bottom Line

Following routines and checklists doesn’t mean you’ll have no losing trades. You will still have losses, but the key is to keep your losses small. And given how the 2023 stock market has played out so far, it may be worth your while to spend time establishing a trading game plan that is logical and aligns with your lifestyle. The key is to have the discipline to follow it so that your emotions will have less of an influence on your trading decisions.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

On this week’s edition of StockCharts TV‘s StockCharts in Focus, Grayson discusses the most important chart on all of StockCharts – your default ChartStyle! In addition to a quick review of what a ChartStyle is, you’ll learn how to save your favorite indicators, overlays and other chart settings as your default ChartStyle that will be used across the site. Whether you’re using SharpCharts or ACP, today’s show will help streamline your charting workflow by automatically loading your go-to chart template. Plus, Grayson will explore the new “Sample Chart Gallery” and show you how the growing collection of pre-built sample chart templates there can help you in your trading or investment process.

This video was originally broadcast on March 24, 2023. Click on the above image to watch on our dedicated StockCharts in Focus page on StockCharts TV, or click this link to watch on YouTube. You can also watch on our on-demand website, StockChartsTV.com, using this link.

New episodes of StockCharts in Focus air Fridays at 3pm ET on StockCharts TV. You can view all previously recorded episodes at this link.