Market On Open - Friday 8 September

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Know The Dominant Trend

When trying to judge the direction of markets, one has to operate in multiple timeframes all at once.  This requires something of mental warmup to get into the mood, but once you're limbered up, you can keep doing the exercise until you retire.  One of the key things to get right is - which is the dominant trend, up or down?  This sounds obvious, but not considering it can lead you to make all kinds of mistakes, for this simple reason.  Whichever technical analysis method you prefer - here in this service we use Elliott Waves and Fibonacci levels as you know - there are degrees to every move.  A big retracement or a small retracement; price moving to the upper or lower bound of the channel, or only the midline; and so on.  In 2022, when the dominant trend in equities was, down, any smaller-degree movement tended to surprise to the downside.  If you were expecting say a 50% retrace?  You got a 78.6% retrace.  And so on.  In 2023, when the dominant trend in equities is, up, the converse is true.  Smaller-degree moves tend to surprise to the upside.  So right now, whilst we "should" be seeing a C-wave down in the Nasdaq and the S&P, (which would take NQ down to say 14000 and ES down to maybe 4200), it's not certain we will get one of that magnitude, or at all.  In bull markets - and we are for sure in a bull market - one should expect to be surprised to the upside, but be on watch for a downside rug pull - which is a dip than can usually be bought.  In bear markets, expect to be surprised to the downside, but watch for an upside rug pull - a rip than can usually be sold.  

What we try to do in these daily Market On Open notes is to place first the larger-degree context for each equity index - the weekly chart looking back and forward over many months and multiple years.  This is designed to demonstrate the dominant trend.  Then with the smaller-degree charts, the daily charts looking back and forth over a few weeks, we try to assess the immediate next move that markets will take.

In staff personal accounts we then use those two pieces of judgment - the dominant trend, and the likely next smaller-degree move - to inform the our index 3x ETF trades.  Whether you trade futures, unlevered ETFs, levered ETFs or index options, you can use these charts for the same purpose.  Oh, and if you're new here, don't forget to sign up for our Slack environment so you get trade disclosure alerts whenever Cestrian staff personal accounts are about to place a trade in covered stocks or ETFs.

Now, for our paying members, let's get to it.  We now move on to walk you through our short- and long-term outlook for the Nasdaq, the S&P500, the Dow Jones and the Russell 2000, together with Bitcoin and Ether.  If you've yet to become a full member of the Inner Circle, you can sign up right here.