I always get a chuckle from this, Blazin's red line of doom.
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I drew that line over 10 years ago
That seems impossible but the main channel of the secular trend sometimes has been a stopping point to the penny but most often its just a good guide post . I posted about it four years ago because we were leaving it going into 2021 and that made me cautious but we held on a back test so I held my nose and bought. Now in hindsight we can see the market did spend some time above the line but ultimately gave it all back.
Going into this year we have been in a similar situation so I've been open to the idea of the top line again becoming support rather than resistance. However as of right now we have failed to hold it on the back test.
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For those interested in the history of these long term trend lines. They absolutely can change slope and historically they have near the end of the secular trend. "The blow off top" People use that term all the time where it doesn't apply but in long term bull markets this trend will at some point steepen and you can get a sequence of monster gains. See 96-99 for an example. The market had been a bull trend for 13 years but things accelerated the trend lines broke to the upside. Fear of missing out really peaks during those periods and people pile in. That period will be the give back period. That is the part of the bull run that will likely be given back in its entirety during the next bear phase. The "easy money" phase will be wiped out.
This is the same trend line that had me go a little heavy early in March 20 because I felt it would hold. It did but for those few days it was certainly crazy trip below the bottom of the channel.
The market hurts itself by increasing the slope. An increased slope makes the lower channel closer so it ends up taking just a short time (3-9months) of running sideways that then puts the trend in jeopardy and then a massive air gap ensues.
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I love studying this stuff, look at how 1987 got punished for leaving the trend line and the correction went to exact point of the bottom of the channel. Then in 96 things start to change and 13year trend channel changed it's slope, and sure enough a decade later the market returned to that exact point. Very easy day to day to get lost in the weeds but when you look at large macro behavior things can really start to come into focus.
Probably boring to people stacking bills and earnings 3% a day but for us less capable I think this stuff is worth a look and helps to understand.
