Welcome to another edition of Technical Thursdays, where we break down current market events and analyze the technical landscape to uncover trading opportunities. Today, I want to discuss how to cut through market noise—especially on big news days—using a simple yet effective approach to spot where the money is flowing.
The inspiration for this post came from the buzz surrounding a recent CPI print, which seemed to dominate Twitter conversations. Despite all the hype, a glance at the S&P 500 showed it barely moved, down just 0.04%. For traders, this reinforces the idea that not all news impacts the market in a significant way.
Instead of getting caught up in headline news, I focus on sector analysis. For example, on this particular day, commodities like oil, copper, and silver were showing strength, while speculative tech names such as small caps and solar stocks were underperforming. By identifying where capital is flowing, traders can position themselves accordingly
Key Takeaways:
Relative Strength Analysis: On major news days, pay attention to sector performance rather than broad market indices. Commodities may exhibit strength while tech stocks lag.
Follow the Money: Identify which asset classes are gaining traction and look for trading opportunities in those areas.
Stay Flexible: As trends shift, be prepared to rotate your focus to new sectors showing relative strength.
With this straightforward approach, traders can avoid overcomplicating their analysis and concentrate on areas with the highest probability for success. As always, keep things simple, follow the trends, and adjust your strategies as market dynamics evolve.