The Uptrend Is in Swing
A higher high is in the books. Now we watch where the next retreat finds its footing.
Fig. 1
A sound judgment is built upon evidence, not upon the comfort of an opinion. This week’s candle close has added an important entry to the ledger: a Weekly Market Structure Break (MSB), the first of my uptrend confirmation signals.
The meaning is plain. Price has closed above the previous high, breaking the structure of the downtrend and establishing a higher high. Higher highs and higher lows are the very construction of an uptrend. We now have the former; the latter remains to be established.
Set this latest development beside the signals that preceded it, and the position becomes clearer. Here is the full ledger, including the confirmations still outstanding:
The pendulum gives us our bearings. We can trace the downward swing, the tipping point at which it stopped, and the beginning of its return. These are not isolated marks. Read together, they describe the passage from a declining market to a new advance.
The market does not always tell us what we are ready to hear. That is no fault of the market. Our business is to attend to the evidence, not to demand that it agree with us.
Confluence
There is another development worth entering in the books, though it does not appear on my list. Around the end of August, the 200 Day Moving Average began to turn upwards.
I prefer to conduct my business on the weekly timeframe. There is less noise, and a man can better distinguish the movement of the works from the commotion surrounding them. Nevertheless, the daily signal deserves notice. It is the same machinery as the turn we still await in the 50 Week Moving Average, operating over a different period. In every historical uptrend, the advance has been underway once the 200 Day Moving Average turns skyward.
One may regard this as an early indication of the weekly turn to come, or as further confirmation that the bottom is behind us. I leave that distinction to the reader. The observation belongs in the account either way.
Higher Lows
No market advances without interruption. Expansion is followed by contraction, and this advance will be no exception. Indeed, one such contraction is part of the confirmation I seek: the formation of a weekly higher low.
Once price has moved up and away from that higher low, the direction of the trend will be plain. My attention is therefore fixed not merely upon the next advance, but upon where the next retreat finds its footing. That position will tell us much about the character of the uptrend that follows.
What Is to Come
My base case is a period of trading within $78,000 – $85,000. That would allow the 50 Week Moving Average to flatten and turn upwards, with price respecting the line before advancing further, as happened in 2023.
This is the path of indifference. Little appears to happen. Interest gives way to boredom. Yet beneath that apparent idleness, a higher low may be taking shape. The market need not entertain us to accomplish its business.
My bullish case is a further advance to around $90,000, perhaps on lower volume, followed by a sharp correction. If that retreat respects the 50 Week Moving Average, it would likewise establish the higher low we seek.
There is also a less welcome possibility, and I will not exclude it merely because it is unwelcome. Cycles can evolve. A correction from present levels could carry price back below the 50 Week Moving Average. We should then hear much of “a dead cat bounce” and the prospect of new lows.
If that unlikely course is taken, we must reconsider the strength we have attributed to the weekly average. A system is of little service if its owner refuses to examine contrary evidence. But it would be foolish to give this possibility substantial weight at present. A break back below the line after closing above it has occurred only once before, during the pandemic.
For now, I keep the account as it stands. The market structure has broken upwards; the higher low and the upward turn of the weekly moving average remain to be seen. There is no need to hurry the evidence, nor to quarrel with it when it arrives. The sound judgment with which we began must govern us to the end: hold conviction in proportion to what the market has shown, and leave room in the books for what it has yet to show.
The man who follows a system is never at the mercy of the market. He may be wrong. He will not be lost.