One of the beauties of the markets is the ability to trend in a direction much further than any participant can predict. When these strong trends are in effect, it's simply a matter of jumping on board for the ride. Sure, lots of indicators and opinions will suggest how "overbought" this market currently is, however, to use an analogy, it is much easier to jump into a moving vehicle than to stand in front of it and make it reverse direction.
The best part of trading in the direction of the trend is that the market will do most of the work for you. As a trend-trader, your biggest responsibility becomes a matter of just managing your own risk. Timing your entries becomes more "forgiving" when trading in the direction of a trend as momentum is on your side. The "hard" part is properly scaling out of partial profits and trailing your remaining balance stops.
A quick glance at the Weekly SPY chart below shows the 4-month uptrend off the Oct/Nov lows is still well intact. The Weekly RSI-14 is "overbought" above 70, but that tends to happen in strong uptrends.
Bottom line, I'm not saying to throw caution into the wind and buy everything, Personally, I'm not a fan of "chasing" extended Higher Highs on a Daily or Weekly basis. So am I Shorting strength? Not at all. Without a prior resistance level, there's no way to determine where Sellers truly are. The best thing to do is to wait for some sort of significant reversal/distribution days to take hold if you're trying to Short this market. Even then, you still have to recognize you are trading counter-trend and will have Buyers lurking on dips to key support zones and uptrend lines and key moving averages. Right now, it's far better to stick with the trend...until it ends.
The charts below show that 7 out of the 9 S&P Sectors notched fresh New Highs as March begins. Only Energy and Utilities lagged.
The graph below shows the Relative Performance of the 9 S&P Sectors vs. the S&P for the month of February.
- Energy, Basic Materials, and Cyclicals were laggards.
- Healthcare outperformed, followed by Financials, Utilities, and Staples.
The table below highlights the Absolute Performance for the 9 S&P Sectors for the month of February.
- Healthcare dominated, followed by gains in Utilities, Financials, Staples and Technology.
- Under-performing was Energy.
The graph below shows the Relative Performance for the 9 S&P Sectors vs. the S&P year-to-date (Jan-Feb).
- Energy has been a significant under-performer so far in 2017.
- Healthcare and Technology have been the favorite spaces for Buyers.
The graph below shows the Absolute Performance for the 9 S&P Sectors year-to-date (Jan-Feb).
- Healthcare, Technology, Utilities, Staples, Cyclicals have captured money-flow this year.
- Energy has seen money out-flow so far.
Any further questions, comments, or inquiries can be emailed to Scott Smith, CMT email@example.com