Blink and You’ll Miss It: Spotting Market Trends with Simple Tools
How a Simple Regression Channel Can Offer Clarity in a Chaotic Market
Before each week begins, one of my go-to practices is updating a simple linear regression channel on my charts. This channel, defined by the past four weeks of data, is then projected forward into the future. But don’t mistake it for a crystal ball; it’s not meant as a forecast. Instead, it’s a practical tool to detect when a significant shift might be underway.
The challenge with traditional indicators like moving averages is that they’re in constant flux. Every new bar recalculates a value, creating a never-ending stream of updates. I prefer something more stable, something that allows me to focus on when the market itself is signaling a change, rather than being distracted by the noise of continuous adjustments.
To illustrate this, take the next 30 seconds and try blinking slowly as you go about your day. It’s a surreal experience, almost like living in a stop-motion film. By disconnecting from the continuous flow of events, you might notice insights you’d otherwise miss. That’s the essence of my approach: step back, slow down, and observe.
Another problem with most all technical analysis is that it is subjective. Using the simple rule of forecasting the 4-week trend helps us avoid curve fitting, such as selecting appealing highs and lows for a trend or changing the parameters on an indicator. By sticking to the same process week in and week out without adjustments, we eliminate subjectivity. It is only the market that changes.
What do the charts say today?
Foreign Exchange (FX)
A general weakness in USD dominated the day.
EUR and GBP were the standout movers, defying steeply negative expectations with significant gains.
JPY, previously a leader, slipped into a laggard position. However, expectations for JPY were modestly positive, contrasting with the steeply negative expectations for EUR and GBP.
Commodities
A weaker dollar didn’t lift commodity prices as one might expect.
Crude Oil: Underperformed relative to its 4-week trend.
Copper: Hovering at the lower bound of its 4-week trend. If it fails to bounce here, the trend’s slope will likely flatten.
Gold: Trading near the mean of its 4-week trend.
Fixed Income
Most instruments stayed within their trends.
Longer durations traded stronger than expected, but those expectations were steep and narrow i.e.. configured for disappointment.
For comparison, the 2-Year Note had modestly negative expectations with a wider regression channel, reflecting greater dispersion.
Crypto
Just another wild day. The new president’s endorsement of meme coins $TRUMP and $MELANIA has fueled speculative fervor.
The administration’s apparent message: speculation is to be rewarded. Could this make Trump the market’s new game master?
Unless Bitcoin takes a nosedive in the coming days, expect next week’s forecast channel to steepen. After today’s quick 6% gain in three hours, I’ve had a taste of the YOLO Kool-Aid—and it’s got me pondering the psychology behind today’s “Ponzi” investing craze. Stay tuned for a deeper dive into this
Equities
Major indexes surged, breaking above the upper boundary of their 4-week trends.
The downtrend has at least moderated, if not reversed entirely.
I’m still eyeing a pullback to 5,920 for a strong long entry point in ES futures.
Summary
By observing the market through a regression channel lens, I aim to identify pivotal moments without being swept away by the daily noise. This week’s data reveals shifts across asset classes—some expected, others surprising. Whether it’s currencies defying expectations, commodities testing trend boundaries, or crypto embracing speculative mania, the markets are alive with signals for those willing to pause and notice.
Sometimes, all it takes is a slow blink to see the bigger picture.