Putting Things into Perspective with Monthly Market Charting

Jun 5, 2014: 12:47 PM CST

Intraday traders often get caught off-guard by surprise movement that defies the logic of their chosen timeframe.

However, it only takes a moment to step up the perspective to the higher frame to get a sense of the bigger picture of what’s going on and what’s more important than an intraday chart pattern (or indicator signal).

With that in mind, let’s take a quick moment to bring up the Monthly Charts of the S&P 500, Dow Jones, and NASDAQ Indexes to put things in perspective as to why this rally doesn’t seem to want to end (and why lower timeframe divergences continue to get mowed over by higher timeframe trends).

A general conversation about the chart above would include a discussion of the Primary Trend or the steady upward movement from the 2003 bottom to the 2007 top into the one-year collapse/bear market that ended in March 2009.

From the March 2009 bottom, the Primary Trend has remained up and has never once been challenged or come close to a larger frame reversal.

The closest point of possible reversal was the 2011 steep retracement toward 1,100 level that ended with a large wave of buying and a stellar up-month which kicked off the current non-stop rally.

From the 2011 low, the market has seen roughly six down months from late 2011 to present day.

Taking all else off the chart, we note the major dominance of the uptrend which is the broader picture of ongoing money flow (as the economy recovers, it is aided with ongoing money-printing stimulus and accomodative monetary policies from the US Federal Reserve and other leading global Central Banks).

The same picture develops in the Dow Jones and NASDAQ Indexes on their monthly charts:

The NASDAQ (beginning at the 2003 bottom – NOT the 2000 peak above the 5,000 index value):

Price continues to carve higher highs and higher lows since the 2009 low and the recent price activity from early 2013 to present has been of the “straight up” or creeper-uptrend one-sided domination environment.

No, this situation (of a non-stop bullish rally) will not last forever – it will retrace – but it’s what we have now:  it’s the cards we’re dealt now.

Take a moment to reflect on these charts and incorporate the broader picture into shorter-term trading decisions (meaning be a little more aggressive with bullish short-term trades and a little more conservative with counter-trend or bearish short-term or intraday trades).

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Corey Rosenbloom, CMT
Afraid to Trade.com

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