As per Tsaklanos his 1/99 Investing Principles it requires a disciplined and asymmetric approach to be successful in financial markets. There are many ways to apply the 1/99 Investing Principles (a variant of Pareto’s 80/20, one that is applicable to success in financial markets). One of the ways to benefit from the 1/99 Investing Principles is to understand when a chart reading is instrumental. Mostly, price changes and chart setups are irrelevant, but a few times per year they are absolutely critical. Friday, October 9th, 2020 is one such day. We’ll review the 2 charts that are so important, and we see a confirmation that our bullish Dow Jones forecast is underway. Stay tuned also for our upcoming 2021 stock forecast, as well as 30 other market forecasts for 2021.
The first chart that is so crucially important is the Russell 2000.
We explained this in more detail in The Single Most Important Stock Chart: Secular Breakout
The key take away is that this week’s rise is a secular breakout!
This bodes well for stocks in general. It is worth being and staying invested in stocks, regardless of what you read out there in the news, is what we concluded.
Note that we want to see 3 consecutive days, ideally 3 consecutive weeks, of trading above 1585 points, for the ultimate confirmation of this secular breakout.
Yes, this is really breaking news, the type that really matters to investors.
The second must see chart with crucial information to investors is the US Dollar.
On Friday, October 9th, 2020, the Dollar broke down from a 6 week rising trend. No coincidence, this 6 week rising trend coincided with the stock market sell off we saw in September.
The Dollar was trying to break out towards the end of September which, if succeeded, would have resulted in a serious breakdown in stock markets. It did not happen though.
Not only did the USD breakout fail, it did also result in a breakdown on Friday.
These are crucial ‘events’, and they ARE the type of breaking news that investors need.
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