I have come to utilize charting techniques less and less as their ability to help handicap asset price movements continues to wither away.
You’re either trading algorithmically in front of the market or you’re a trading loser. Every single chart pattern and set of indicators in every conceivable combination has already been mathematically expressed by people smarter than technical analysts, and easy profits have been completely arbitraged out of the market from visual chart cues.
There will always be pockets of sheer luck. There are always exceptions. But earning consistent profits on price/indicator pictures…get real.
I have come to rely more and more on fundamental analysis, experience (see “gut”), and semi-quantitative tools to manage the risks of trading capital. Like a degenerate heroine addict, I still chart. I’ll never give it up, but it’s just another input. Mostly noise. Sometimes valued signal.
Despite all that, here’s one visual cue I think a lot of professionals are probably waiting for and that is a second long-stem on the S&P 500. It could potentially indicate that risk appetites have returned. If the HFTs see this then we could see a “schooling” move upward, like fish or a flock of birds, as the programs feed on each other’s momentum calls.
Take a look to better understand. We are looking for a 2% to 3% wick below the weekly closing price. That’s it.
That might be all it takes to re-engage risk taking. Not without increased volatility, of course, because liquidity is draining and conditions are tightening.