Long-Term Charts

Paper's Trading View Indicators

Yes, in the long term, we are all dead. I am, however, sure you have seen some multi-year charts from me if you have followed me for a while. Like many other things, charting mostly reflects your personal style and preferences.

We are dealing with a highly complex system when assessing markets. A multiplayer game with many actors, varying approaches and views. It all in the end reflects one thing, absolute and relative prices over time.

Long-term for me means multi-year secular trends. That’s why I go for monthly candles if there is data available. If not, weekly might also do the trick, although it is not my preference.

Now, let’s look at it in a bit more detail. This is the SMI with monthly candles going back to 2005-ish.

I like using Bollinger bands, 20-months and 40-months which are overlapping. Both with 2 standard deviations. This, I have found out captures the longer-term moves relatively well and puts things in perspective.

It’s interesting to note, how at the current juncture we are bang in the middle of the 20-month band.

In addition, I am using a simple RSI to assess overall tops and bottoms and their relative strength.

This has historically been quite useful in assessing the likely tops and bottoms in varying markets.

As a supporting indicator, I toyed around with the KST indicator. Know Sure Thing might not be the most appealing name, but I quite like the concept of it. It is the aggregate of four different rates of change periods and its moving average. Have a play around with it and change parameters as you like.

Putting it all together is, I guess, where the art comes in. To me, standing back and looking at the overall picture gives me a good idea of where we are likely headed and what the big ranges are. In theory, we can have huge moves on this basis without challenging the prevailing move. Easy to get lost in the short-term but hopefully helpful to keep the overall picture intact.

Looking at US-10-year yields for example (although I don’t like looking at yields for technical analysis) would suggest that we are indeed at levels stretching the imagination of both Bollinger bands, flashing on the RSI as well as an eye-watering KST which just crossed its signal.

As in all things macro, however, regime shifts can nullify those well-meaning charts. What if the Fed ultimately has to go to 6+% Fed Funds? No chart technique in the world will be able to cater for that.

The lesson here though is to have both short-term and long-term chart techniques at hand to help you assess where things are likely headed and have a handle on risk/reward opportunities.

While it is tempting to look at various markets in isolation, I urge everyone to not track things in a vacuum. Everything is related. So looking at Stock Indices for example defeats the purpose if you are not looking at it relative to say bond or cash returns.

Good Luck out there!

Your

Paper Alfa

Music

Now, I used to watch a series that many of you might judge me for. It was “The Good Wife”. Stop it, it is awesome. In one of the many sad scenes, they played the below tune I just got obsessed with for many years. It still impacts me emotionally to this day. Hope you like it.

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