Mean reversion is the opposite of trend following. Investment strategies that leverage this occurrence, look to profit on countertrend moves. After an extended price move, asset prices can return to normal or average levels, either within a trading range or within standard deviations of a moving average or trend line. In this edition of the GoNoGo Charts show, Alex and Tyler review a lot of charts in Go trends that are at or reaching resistance, or prior levels where markets might find overhead supply from sellers.
The objective approach using GoNoGo Charts is to look for momentum divergence in the GoNoGo Oscillator as signs of rejection, or price breaks above prior highs that would facilitate trend continuation. The bifurcated leadership of equity sectors also frames the inflexion point that the US stock market is at right now. Large Cap growth in both tech (XLK) and communications (XLC) is leading; at the same time, defensive sectors such as healthcare (XLV), staples (XLP) and utilities (XLU) are outperforming the benchmark in relative “Go” trends. Alex and Tyler drill into the industry subgroups that are pulling these sectors higher. The message is clear that gold and cryptocurrencies offer the most constructive evidence for continued outperformance.
This video was originally recorded on April 13, 2023. Click this link to watch on YouTube. You can also view new episodes – and be notified as soon as they’re published – using the StockCharts on demand website, StockChartsTV.com, or its corresponding apps on Roku, Fire TV, Chromecast, iOS, Android, and more!