{"id":199668,"date":"2023-12-04T07:46:30","date_gmt":"2023-12-04T12:46:30","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=199668"},"modified":"2024-01-24T13:54:01","modified_gmt":"2024-01-24T18:54:01","slug":"chart-advisor-leveraging-breathtaking-reversals","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/chart-advisor-leveraging-breathtaking-reversals\/","title":{"rendered":"Chart Advisor: Leveraging Breathtaking Reversals"},"content":{"rendered":"\n<p>By<a href=\"https:\/\/links.investopedia.com\/u\/click?_t=36ba8fa8372241d58b3bfc06997a4332&amp;_m=12c6009f29154051ae6cfd5b37a85240&amp;_e=rs7kONDohBrGtlHiW-4mNvjSaWFcGdMiixVoQfjWybfhiBX4pLq7od55t3GwBW6RzTLlpgIQhqHYSMYtpk9az8H6ZdMbYF8CTLEEkIWV0KRG2LFMIqZh57_QxL7Xc_PvFBRKo00M4k5s-5Ltqz_nbjwpjTCeZ3n3KRMDwR4VBBZRXFUDTyv7LB9mPllIM2Ot_N7JZpprlDbmLdoT8P1qr6A_RKjC6epF9t0vO56Qi9a0wefExb0WtYwhrY5Kp4RRIY4wTMquix7LrC0WdiWnb9AdE36Fiez64REWC3VVc6VdnTBYBb0nHx8pxFYo_Tp4KSyURqnv4vIqYzPSq-EbwUMswljDIjSu6-hN_A4vMag61Sscdn3NwMuAQzIcYBhxiqxjKLgz8e0EhyBYA68KqYugNWiTUP96eKxaNE_Yl53_uGvOMaLA1UXMm4dbkoSakCYMSPp4Ud4tHMNWjBWsng%3D%3D\" target=\"_blank\" rel=\"noreferrer noopener\">&nbsp;Gordon Scott, CMT<\/a><\/p>\n\n\n\n<p><strong>1\/ Indexes on&nbsp;the Rise<\/strong><\/p>\n\n\n\n<p><strong>2\/ A Bullish Indicator<\/strong><\/p>\n\n\n\n<p><strong>3\/ Keeping a Cautious Mind<\/strong><\/p>\n\n\n\n<p><strong>4\/ The Stop-Go indicator<\/strong><\/p>\n\n\n\n<p><em>Investopedia is partnering with CMT Association on this newsletter. &nbsp;The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1-indexes-on-the-rise\">1\/ <strong>Indexes on the Rise<\/strong><\/h2>\n\n\n\n<p>November charts gave investors a few reasons to breathe a sigh of relief after the troubling price trends that developed in the major indexes beginning last summer. The past month has seen breathtaking reversals in all major equity indexes including both the large-cap S&amp;P 500 (SPX) and the small-cap Russell 2000 index. The chart below shows how iShares\u2019 Russell 2000 ETF (IWM) outperformed State Street\u2019s S&amp;P 500 (SPY) and Dow Jones Industrials ETF (DIA) as well as Invesco\u2019s Nasdaq 100 ETF (QQQ). The fact that small-cap stocks outperformed the other equity indexes means one important thing: investors are ready to take risks again. That is a largely bullish indicator of future performance.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/12\/1-2-1100x505.png\" alt=\"\" class=\"wp-image-199669 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/505;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2-a-bullish-indicator\">2\/ <strong>A Bullish Indicator<\/strong><\/h2>\n\n\n\n<p>A few years ago I wrote and Investopedia article mentioning how low volatility in the markets could be a&nbsp;<a href=\"https:\/\/www.investopedia.com\/low-volatility-could-be-a-bullish-indicator-4775715?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11214456-20231204&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=120423\" target=\"_blank\" rel=\"noreferrer noopener\">bullish indicator.<\/a>&nbsp;That indication lasted for about a month before the rising volatility coinciding with rising prices signaled a huge warning flag in front of the COVID panic. But that brief blip aside, the following year turned out to be quite bullish after all.<\/p>\n\n\n\n<p>The following chart gives three indications that 2024 could be a strongly bullish year in its own right. First, SPY rose more than 10% during the month of November. This is, historically speaking, a very bullish prognosticator. Second, the average true range indicator is approaching its lowest level since before 2022, and this corresponds with what could be a continuation of the upward trend. Third, the Cboe Volatility Index (VIX) has hit its lowest since before the pandemic, displaying that option sellers expect less volatility than any time in the last three years. All three signals are strongly bullish indicators.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/12\/2-1-1100x514.png\" alt=\"\" class=\"wp-image-199670 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/514;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-keeping-a-cautious-mind\">3\/ <strong>Keeping a Cautious Mind<\/strong><\/h2>\n\n\n\n<p>About the only thing that could generate worry in the minds of investors would be the sign of an imminent recession. The inverted yield curve returning back to its zero line would be just such an indication. While this could happen in 2024, that could be several months away and a bullish market behavior could result all along the way up until that time comes. Meanwhile there is no guarantee that the inverted yield curve means a bear market is inevitable, even if the country does face a recession.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/12\/3-1-1100x512.png\" alt=\"\" class=\"wp-image-199671 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/512;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-4-the-stop-go-indicator\">4\/ <strong>The Stop-Go indicator<\/strong><\/h2>\n\n\n\n<p>In 2013 I co-authored a book titled \u201cInvest to Win.\u201d Within those pages I articulated something I called a Stop-Go indicator. The rules behind this indicator have a pretty strong record over the past century for indicating bear market setups. Right now, this indicator is showing exactly the opposite. With large cap stocks in general outperforming the utility sector coinciding with a marked decrease in historical volatility (as measured by the ATR on a monthly chart), this is the perfect signal that forecasts a \u201cGO\u201d market, meaning a bullish outlook for the months ahead. Investors who have been too timid to rejoin stock market investing over the past few months may want to re-evaluate that position.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/12\/4-1-1100x522.png\" alt=\"\" class=\"wp-image-199672 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/522;\" \/><\/figure>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally posted 4th December 2023<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The past month has seen breathtaking reversals in all major equity indexes including both the large-cap S&amp;P 500 (SPX) and the small-cap Russell 2000 index. <\/p>\n","protected":false},"author":186,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[14,15,18,6,9,22,23,26,3],"tags":[3057,208,2782,207,262,11533,6100,317,1323],"contributors-categories":[13686],"class_list":{"0":"post-199668","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-etfs","7":"category-fixed-income","8":"category-macro","9":"category-north-america","10":"category-securities","11":"category-stocks","12":"category-technical-analysis","13":"category-text-articles","14":"category-traders-insight","15":"tag-dia","16":"tag-iwm","17":"tag-qqq","18":"tag-spx","19":"tag-spy","20":"tag-us02y","21":"tag-us10y","22":"tag-vix","23":"tag-xlu","24":"contributors-categories-investopedia"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is 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