In this market, Heroes need not apply. Here’s a tip from Scott about staying on the right side of the trend. $SPY – September 28, 2021


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This is Scott with your Chart of the Day. I want to take a look at the overall market and really just give you some tips that help me stay on the right side of the trend, especially, during times of uncertainty, seasonal weakness, and chop.

One of the rules that I have as an active investor is to really kind of be light in terms of my exposure when the market, the SPY ( NYSEARCA: SPY ) here, is under the red line, that is the 50-day moving average.

Typically, in this season, you can see back here in September and October, we had a lot of choppiness. And so here we are back in September, October, surprise, surprise, we get choppiness. But what you can find is, you make a lot of money during this nice uptrend and you tend to give it back during the period’s up-chop.

What you can do is essentially develop a rule where you say, okay, if the market is below its 50-day moving average I’m not involved. I am on the sidelines waiting for clarity. And by doing that you can sidestep a lot of that giveback that a lot of traders have during times of chop and uncertainty.

I would just recommend, try to be involved in the market for the nice trend and then just sidestep anything that is below the 50-day moving average. I have mine colored red and my saying is, “Under Red, You’re Dead”. And that is just because I have had that experience, where I have given back a lot of my profits that I have made during the nice uptrend within just a few days of crazy sideways chop.

So consider putting the 50-day moving average on your chart and color it red. And then write a little note on your computer that says, “Under Red, You’re Dead”. And then you know, when the market is under the 50-day moving average you are dead in the water, not doing anything, and waiting for clarity, I hope that tip is helpful.

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