My trading strategy is 100% dependent on an overall consensus on what market I think we are in. It really only works in a bull market/sideways trending market. How I identify this is super simple, and this blog will be pretty short because of that.

Here are the ticker symbols that I consider to be the "market". $QQQ and $SPY.

The ticker symbols I consider to be the market are $QQQ mainly and $SPY. These, in my opinion, display the US economy in stock form and are the indexes that typically encompasses the small caps I am trading. Also known as the Nasdaq and S and P 500. You can use any chart that displays these, but I use these ones.

Now how I identify if these are in a bull market vs a bear market is easy, I use Simple Moving Averages (SMA) on the daily chart. Specifically the 10 day SMA and 20 day SMA, colored accordingly. Below is what my chart looks like normally on both $QQQ and $SPY.

Now so you understand what you are looking at, the blue line is the 10 SMA, pink is the 20 SMA, orange is the 50 SMA, and yellow is the 200 SMA. Disregard the 50 and 200 for this blog. But focus in on the 10 and 20 SMA.

Real quick, I will explain with words what a bull market is and what a bear market is, and what a trend reversal might look like. So a bull market AKA uptrending market, is when the 10 SMA is ABOVE the 20 SMA. On my chart the blue line is above the pink line, and it basically means that the average price over the past 10 days has been increasing along with the past 20 days. So, uptrend. A bear market is when the 10 SMA is below the 20 SMA. Same logic as a bull market, just vice versa.

Now how you identify a possible trend reversal is the 10 SMA crosses the 20 SMA, both ways. If we were in a bull market, and the 10 SMA cross below the 20 SMA after a daily candle CLOSE. Then that means we might be seeing a possible trend reversal, and for my current breakout strategy means I stop trading it. Now vice versa, when we are in a bear market (10 below the 20) and then the 10 SMA crosses above the 20 SMA after a daily candle close, then we might be reversing back into an uptrend.

Now the images below are depicting what a POTENTIAL trend reversal might look like, starting with a trend reversal into a bear market.

Notice how the blue line (10 SMA) is now below the pink line (20 SMA), after there was a daily candle close. This means that we could start seeing price action to the downside in the coming days/months.

Moving on, the below images are going to be possible trend reversal's from a bear market to a bull market.

Super simple, super easy to spot, and a gamechanger for spotting trends reversing. Now I incline you to go and do your own research. Look through all of the years of the major indexes and have the 10 day SMA and 20 day SMA enabled on your chart. You'll see that it is a useful tool in spotting overall market trends.

BUT, it like everything else in trading the stock market, is not a 100% fool proof way to spot what direction the market is going to go in. Of course you will be wrong sometimes, and get faked out, but it helps you spot those major corrections before they happen and can protect your account.