Situational Awareness post



I’ve been getting some DMs asking about how I ‘time’ the market. For me, timing the market means being able to spot upcoming pullbacks. This enables me to reduce fresh risk size, peel off some shares, and make more positions safer. I try to track pullbacks because I am more focused on the long side. Calling the bottom of a bearish trend is not that crucial to me since most of the time I will likely be mostly in cash or trying to progressively expose myself to positions.

Most of the damage occurs when you are heavily exposed to a sudden pullback/ shift of current trend. So that is where my focus is.

Now, trying to call the top or identify a general shift in trend is one of the hardest things to do as an individual, and attempting to constantly do it might make you miss out on some great market periods, where things appear overbought, and stocks are consistently ripping higher day after day.

I personally gather more clues about the market’s breadth by delving deep into lots of individual names rather than looking at overbought indicators or straight at major indices. I will explain:

So one thing I developed to not overdo it is looking at the strength and quality of Breakouts. Breakouts are an essential part of bullish trends in the markets. If you research the history, you will see that usually, breakouts emerge in clusters at the start or during bullish trends. This can lead to a conclusion that the absence of them will also happen in clusters, usually before a ‘pullback.’ That is what I am trying to track, and that is why keeping back-watchlists of any trading day is important.

Now, let’s outline the key factors that raise red flags in this tracking process:

1. If, for a period of 2-5 days, my focus list of the day is limited to names near a breakout zone or their is an absence of them, I get a red flag.

2. If I review the past week’s watchlists and see many names failing to breakout from fresh bases, I get another red flag.

3. If the fail rate of breakouts that happened in the past 1–1.5 weeks is greater than usual, I get another red flag.

4. If major indices are distancing themselves from the 10MA or hitting a historical resistance level, I get another red flag.

5. If 1, 2, and 3 are true, and major indices are closing below the 10MA and 20MA, I get another red flag.

I exclude Biotech or ‘strong themes’ from this tracking process because these can work well even in bearish trends or pullbacks.

Hope this helps!
















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