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The old saying is Go Away in May and Come Back at Halloween. This is because many academic studies have shown that most of the rise in stocks each year occurs between Halloween and May., The market has climbed this year since May,  however.

I think there was a good reason that William O’Neil’s books usually showed weekly charts. Daily charts are much more volatile and lead to more trading whipsaws. Weekly charts show the major trends more clearly.

This weekly chart of SPY (the pattern for QQQ, not shown, is similar) shows what I have found to be the classic pattern of an up-trend. The 4 week average is rising above the rising 10 week average which is above the rising 30 week average (indicative of a Weinstein Stage 2 up-trend). Note the GLB (green line break-out) to an ATH (all-time high) in June. Since then, SPY has only closed the week below the 4wk average twice and then  bounced up off of the 10 week average. A weekly close below the 4 or 10 week average could be a significant sign of weakness or of a change in trend.  With stocks and indexes, I find that a week that ends with a bounce up off of the 4 wk average can be a possible buying point.

Such bounces up off of the 4wk average are shown in this chart by green price bars. One might buy after a weekly bounce up off of the 4 or 10 wk average and place a stop loss below the low of that week. If the stock closes the week below the 4 wk average, I might place my stop below that week’s low. To use this setup one would wait until Friday to ascertain where the week’s close is likely to be. This setup frees me up from having to watch the market all day. I urge readers to build this chart layout and analyze the  stocks they have been trading. Regardless of the setup used, it may indeed prove profitable to be invested long this Halloween. Let’s see how the market looks at 3:30 Friday.

I saw it, but missed trading $GLD after it had its Blue Dot of Happiness signal on August 20. Two days later, on August 22, it climbed above its daily 5 EMA (exponential moving average) and has only closed below it once. One could have bought GLD on any of the bounces up off of the daily 5 EMA and profited greatly. During my  recent TraderLion Conference talk on Day 6, I described the Blue Dot of Happiness signal and how I was using the 8 EMA. I have since found the 5 EMA to work even better for many rising stocks. Add the 5 EMA to your daily charts and see how many times advancing stocks bounce up off of this EMA. Note how GLD has traded between the 5 EMA and its upper 2.15 Bollinger Ban for the entire time. If I owned GLD I would become defensive the first day it closes below the 5 EMA.  With this chart in mind, you too could create rules to trade GLD and other stocks showing this pattern. In addition to the chart of GLD, I show as an example, a similar pattern in IREN, which I successfully traded. I am not suggesting anyone should buy these stocks now, but only to learn this pattern and find other stocks beginning to track along their 5 EMAs. Why this can work, I do not know, or care. I have been using TC2000 to scan for rising stocks reaching ATHs and tracking with their rising 5 EMAs and bouncing up off of them. When I buy after a bounce, I immediately place a sell stop below that day’s low. Good Luck!

Have you noticed that when earnings are released, stocks often have large moves up or down. After the earnings report period, stocks tend to settle down until the the next quarter’s earnings begin again. August and September tend to be weak months in the market. I expect at the end of the current quarter, around October, we could see the end of market weakness. Remember the maxim, Sell in May And Go Away And Come Back at Halloween. We have seen some rapid selling in the leaders. It is possible that the QQQ short term up-trend will end on Thursday, after 81 days. This is one of the longer QQQ short term up-trends I have seen. So it is not unexpected that it could end soon. But the end of a short term up-trend does not necessarily mean a large decline is coming. Almost half of new short term down-trends end within 5 days. So, I wait, mainly in cash, to see how this will all play out. I try not to marry a scenario. I just respond to the market’s actions and signals. I can reverse on a dime.

Many stocks bounced up off of their lower 15.2 Bollinger Bands on Wednesday (PLTR, AGX, FIX, IBKR, RMBS, to name a few). Tomorrow will tell if these bounces hold. Look at this chart of PLTR, as an example. The arrows show three prior such bounces. Note that each time the stock closed near its daily high on the day of the bounce. Will this bounce hold? We will know tomorrow. If the QQQ short term up-trend ends Thursday, I suspect many of these bounces will fail. I did not play this bounce. But if I had nibbled at PLTR today, I would have placed a stop loss just below the day’s low. Note the blue dot signals at each bounce. I explained the Blue Dot of Happiness indicator during my recent TraderLion Conference speech.