Chart Talk {3.05.19}

We said on Friday {The post directly below this one.} "if you look at the history of this advance since 2009, you will see a market that has had multiple periods where it staged pretty spectacular advances followed by periods of consolidation that lasted anywhere from a few months to several years."   I also stated that I believe that we are currently in one of those consolidating periods.  Today I wanted to show those to you by posting a monthly chart of the S&P 500.

If you look in the highlighted areas you can see the market has previously gone long time periods where it basically trended sideways.  These periods have lasted months to years.  The sideways movement that started in roughly 2014 lasted the better part of two years but it was consolidating a better than 30% gain from the prior move higher.  

There are a few of other things to note here.  First although it's not noted on the chart, this market has never decisively penetrated it's trend line from the 2009 lows.  Thats the purple line you see roughly bisecting the chart in have while also sloping upwards from left to right on the chart.  The index has  touched that line on a few occasions but never had a convincing breakthrough below it at any time during this bull run.

Another is that this market has probably spent as much time consolidating prior advances as actually trending higher.  We've tended to trade flat for months or years and then witness these explosive moves out of these ranges that so far have all resulted in nice gains.  If you tried to time the market and you hit it wrong you missed out on some pretty substantial profits.

Finally don't get all that hung up on point moves in the market.  Instead pay attention to the percentages.  As an index like the S&P 500 moves higher the point swings are going to increase.  Last year's declines on a percentage basis were pretty substantial but not that much different than the declines we experienced back in 2011 or in early 2016.  

Back Thursday.

*The chart above is from Tradingview.com although the annotations are mine. You can double click on the chart to make it larger if you would like.  The boxes denoting the trading ranges are not exact.  They are meant to show the concept of how we've consolidated during certain periods in this bull market.  Also as of this writing I am long SDS in a personal account.  SDS is an ETF that gives you leveraged short exposure to the S&P 500.  I am long as part of a separate individual strategy unrelated to our normal portfolio investment decisions.  This is a very short term oriented position and will be subject to change at any time without notice.