On the flip side, when the market falls, it’s also easy to fall into a bear<\/a> trap.<\/p>\n Sure, context can help make sense of a stock’s chart… but many times traders just rely on the chart.<\/p>\n So, the chart becomes the primary driver of their decision.<\/p>\n But trading off chart patterns alone<\/em> guarantees terrible performance…<\/p>\n Take the SGI Cross Asset Trend Following Index, which tracks the performance of trend following signals across stocks, bonds, and commodities.<\/p>\n In a nutshell, these systems are long when the market is above a trend or moving average<\/a>… and neutral or short when it’s trading below it.<\/p>\n Since Q1 2015, it fell 6.5% while the S&P 500 rose 116%.<\/p>\n All that time and energy spent poring over some pattern on a screen could’ve been spent elsewhere – all while doubling your money just by being passively invested in the markets.<\/p>\n This shouldn’t be a surprise since trend following is the most accessible form of trading… anyone can get access to charts and open a brokerage account.<\/p>\n And if anyone can do it, then it’s close to worthless… as the data has clearly shown.<\/p>\n I say this because the market has recently reclaimed its 50-day moving average (MA) on Friday. Just like the bears were getting too excited about getting vindicated for their negativity a couple of weeks back – the bulls are making the same mistake now…<\/p>\n Now a week later – with the S&P 500 having reclaimed all of its moving averages – all headlines are pointing to the strong showing of big banks’ earnings.<\/p>\n The bears are frustrated again, and soon so will the bulls. That’s because we are entering a choppy zone in the market, as Jeff Clark pointed out last week<\/a>.<\/p>\n I know the charts are showing something different right now, but for the next three weeks, the markets will be driven by earnings. And this is where context comes in…<\/p>\n Earnings just<\/em> started…<\/p>\n And it’s rarely a smooth ride…<\/p>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202110\/20211019-jmu-01_qok252.png\")
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