Road maps

Hey Market Pilots,

While we know that 80% of stocks follow the market, I have found that the path of individual stocks can act as a sort of road map for the future of the market itself.

For example: The SPY is between the 50 and 200 Simple Moving Averages on both the Daily and Hourly chart. This is a very confusing location to be as we don’t know which moving average is going to be the stronger one; a very important piece of knowledge since it’s the difference between more upside or a thrashing to the downside. 

When I don’t have a clear picture of what the market is doing or going to do, I browse through a few hundred stocks to see what they are doing. Afterall, if the market is made up of stocks and 80% of stocks follow the market, it can be a little of which came first, the chicken or the egg? As I was looking around, I began to notice that a high number of stocks looked similar to the SPY but with some ahead and some behind, developmentally. 

I looked more closely at the ones that appeared further along in development than the SPY and analyzed what the common theme was. I started to notice that their Daily chart wasn’t very clear or helpful since they too were often right between the 50 and 200 SMA’s. The only thing I slightly picked up on was that many have been able to hold the Daily 50 SMA support.

I then looked closer, down to the hourly chart, and noticed a common theme of price generally following the Hourly 200 SMA. After that, another piece of information I was able to glean was that most stocks had an up-trending 200 SMA on that time frame and price was respecting it. 

Now, things can always change, but if the Market itself can hold its Hourly 200 SMA, then those other tickers I used as a road map proved to be a good guide and an example for where the SPY may go in this fogginess. This process of looking for possible road maps in individual tickers helps me keep my head on a swivel and prepare for what a long move might look like, even though that direction may seem unlikely given the current economy.


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