Tackle Today: Pause… and Run?
October 22, 2021
≈ Unlimited Energy? ≈
Traders,
I remember way back in 1988 there was a race between two humans, or at least we thought they were humans. I am referring to a sprint race between two guys, one named Ben Johnson and the other one was Carl Lewis. At the time these were apparently the two fastest humans on the planet. Perhaps this was a bit of hyperbole but that was the big build-up to the race. Most of the people that I knew were bantering between who they thought would win. Of course, there were two very distinct camps as Johnson was a Canadian and Lewis was an American so there was a built-in rivalry.
So as most folks were picking sides I was pondering something completely different. I was always a bit different when it came to analyzing things. I wasn’t thinking about how fast these guys were because really we had already been told they were the fastest and so I found myself thinking about endurance and output. I was curious about how long these fast runners could keep up this crazy pace? They were running the 100-meter dash and doing so at a crazy pace but could they keep it up for 200 meters or 500 meters or maybe even a mile? I figured this crazy pace was unsustainable for long periods of time as there is a limited supply of energy before needing to be replenished.
After reflecting on the above scenario, I came to the conclusion that the markets are in a similar state at this moment. We had a solid V-shaped reversal in the last couple of weeks and then a sprint back up to nearly the all-time highs but these types of runs are usually unsustainable in the long run. We can also see that the energy of this run is waning as the candles are getting smaller and smaller. This is the clearest sign of energy exhaustion that I can think of. This is a scenario that plays out over and over in the markets and it takes the special skill of patience to know what to do next.
Only with patience and reflection will we know for sure if this market will pause and run or turn over and this is a question every trader wants the answer to.
Trade Well,
#TeamTackle
Chart of the Day
/ES (S&P 500 Futures) with RSI
This chart of the /ES shows the V-shaped recovery from the last couple of weeks and it also shows the waning energy within the last three or so candles.
Video of the day
Fundamental Focus: PEG Ratio Explained
Coach Greg explains what PEG Ratio is and how traders and investors can use this important fundamental concept.
Today’s line up
Traders Lounge 11PM EST
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Cash Flow Club Replay
If you missed last night’s episode with Coach Gino Poore on How to use the Position Sizing Tool or would like to watch it again, check it out here.
Halftime Report 12:30PM 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 Matt and Tim can deliver.
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