Coach Mark here.

The markets have been in a bit of the pullback to start the year in equities and we tested the 20-day moving average yesterday. Pullbacks in uptrends are normal and often a healthy thing. Markets tend to be more extreme than ever and in those extreme conditions we tend to get overextended. Those overextended conditions make it difficult to extend the uptrend without a cooling off period which pullbacks tend to provide.

The question on a pullback is always “how far is going to go” along with the natural worries that accompany the pullback. One of the things that are supportive of pullbacks are rising moving averages on multiple time frames. While a trader might be worrying how far a pullback might go, algos are often buying at those rising moving averages providing short-term support.

I am teaching my Hard 14 class tonight which focuses on moving averages. I have analyzed a lot of uptrends over the decades in similar conditions to the one we are in now and during the first real pullback that occurs a rising moving average always seems to act as support in the short-term. Sometimes it is the 20-daily moving average, sometimes it is a weekly moving average…but one always seems to be there in the short-term to help stabilize price.

Eventually trends can break but this is no easy task. It is why traders will look at pullbacks as an opportunity to get into the existing trend rather than trying to guess when it will end.

Have a fantastic Thursday!

Chart of the Day: S&P 500

Rising moving averages are a hallmark of uptrends. While you might not be paying attention, algos are looking at pullbacks to rising moving averages as potential buying points.

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Cashflow Club 8:30 PM EST

Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only the coaches at Tackle Trading can deliver.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.