Over the past couple years – both on Twitter and the old blog – I shared a simple indicator configuration I use to gauge the overall market environment.
I use these same indicators on different timeframes, but earlier today I just happened to be looking at the weekly timeframe and as they say in the C-Suite at Hindsight Capital “it was so obvious”.
But the point of this post is to share a #simple indicator you can slap on your chart that tells you the “direction” the market is going on any timeframe.
Now that we have this #simple indicator at our disposal, it’s fairly reasonable to assume that “when or if” the DMI turns green again – on the weekly timeframe – the market environment will have turned much more constructive.
“Investors” are assuming (hoping) the environment will turn constructive again soon and what we are currently witnessing is a “healthy correction”. Their optimism will be vindicated when the DMI (10) turns green again. But since this is the Weekly timeframe we are dealing with – that ain’t gonna happen anytime soon. (guess it depends on how you define soon).
The Directional Movement Indicator does not lie!
The most important thing in my opinion when discussing the market – is identifying the timeframe one is dealing in. Without that they’re just talkin’ smack.
It’s funny how much of the market discussion fails to even mention timeframe. When it does, it’s typically the standard boiler-plate narrative “we’re long-term investors with a 5-year time horizon”.
With that sort of timeframe I would think one would have the luxury of kicking back and waiting for the DMI to turn green before assuming now is a good time to buy stocks for the long-term.
As I observed recently on the Monthly timeframe “this market is toast unless it can make a new all-time high”. My guess is the Weekly DMI turns positive ahead of that and we can all subsequently raise our year-end price targets.
Stay cautiously optimistic my friends…