The Charts Tell Me to Expect More Upside

The gap up and close at new all-time highs for SPY is a reason to be bullish.

I worked the first part of my career at a fund, learning how our top portfolio managers thought about the markets and how they constructed our portfolios.

No matter how much they knew, and they knew a lot, they could not know it all and inevitably would eat their words on a few positions in a big way.

After spending the second half of my career reporting numbers to Wall Street for a Fortune 500 company, I learned a lot about what goes into those earnings reports.

After two decades of experience on both sides of the numbers, I will tell you I don’t trust any of them.

I don’t trust the numbers being reported and I don’t trust the money managers or their models that rely on fundamental analysis and “getting to know management.”

You probably know by now; I do trust the charts. And my experience is why.

So let’s get right to the chart for SPY which is at all-time highs.

SPY daily candles

There are a number of things to pay attention to as the candles power higher.

First, we are not seeing any signs or reasons to think markets are about to reverse. There just aren’t any.

You might point to RSI and say we are at overbought levels. But I would immediately point to the fact that we’ve been at overbought levels since November, or 60 points lower from where we are now.

You might also say we just gapped up followed by a huge day that continued to trend higher. Shouldn’t we see profit taking?

You certainly will, but there has not been enough to outweigh the buyers with FOMO. The fear of missing out on more upside after sitting out of this rally is real.

Last year there were a lot of money managers that missed the rally at the start of the year and they had to play catch up.

They don’t want to do that again in 2024.

Getting back to the chart, take a look at every time there has been a big move higher, including the gap up in November and yesterday.

Each of these moves is followed by a continuation higher. The 5-day simple moving average (SMA) holds as suppport and the candles move.

We just keep seeing more upside!

Notice too, the 20-day SMA has been respected throughout this move higher. It crossed above the 50-day SMA in November, and we have not looked back.

I also find it interesting that along with this market rally we are seeing a resurgence in the energy sector.

I highlighted a few trades to keep an eye on earlier in the week after pointing out that XLE (energy sector ETF) was testing the 86.11 resistance level again.

We now have two days closing above 86.11 and I’m looking for the third to close even higher. If that happens, I’m looking for a push towards 90.75.

I think we could start to see big moves higher in energy, especially if the price of oil gets back above $80.

VNOM, ET, and PXD are all names on my active list.

And one last note.

You might hear bearish talk because of the incredible run we have seen.

That is the exact opposite sentiment the chart for SPY suggests we should have. The chart points to higher price levels, riding the momentum.

I have no doubt we will see a pull back at some point, but I do not know when or how deep and I am not going to try to guess either.

You can bet that I have cash set aside to buy in bulk for the long-term portfolio when the opportunity presents itself.

Until then, I’m staying long and trading the uptrend.

Close the week out strong and stay tuned for more trade ideas this weekend!

-Nate

@tradernatehere

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