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The chart above represents shortly after 1997. We started to show clear signs of divergence
with price action continuing to make higher highs and the RSI continuing to make lower
highs. What is divergence? When an indicator does the opposite of price action. If you see
divergence, it simply means price action is about to do the opposite of whatever it did during
the divergence. Please note this is the Monthly chart of the SPX.
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Stock &
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Course 2
Now the above chart is the same monthly SPX. Look at the year 2018 until 2020 – divergence. It had the
same result, except we are in that move right now as we speak. If you ask yourself, well, would it have
worked out if you bought during the crash of 2000? Turns out, it would have been a great win but only for
the long term mindset and long term approach.
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Stock &
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Now we are looking at the monthly chart of DJI. You can see, it also had strong divergence during the same
period as the SPX. We had warning signs, big warning signs. IN fact, we had the same warning signs as we
had back in 2000 with the dot com bubble.
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Stock &
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Please note the above picture illustrates how you can add the yearly candle to your tradingview
account. IN fact, you can use this approach to add other unique time frames as well.
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The above chart represents the SPX with yearly candles. This is a chart that nobody is paying any
attention to and this is something we have never seen in history – divergence on a yearly chart.
Keep in mind, when you see divergence on the daily, it’s not as powerful as divergence on the
weekly, which is not as strong as divergence on the monthly ect. The divergence occurred from
year 2000 – 2020. That’s right, 20 years of divergence.
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Please note: this is not used for day trading or swing trading or even hybrid trading. This is a big picture and
long term investing approach to take advantage of the natural stock market cycles, which by the way are a
lot longer than crypto cycles.
What you see at the top of the chart is the 100 Month ma for the SPX. This blue moving average is a simple
approach to understanding where we are at in terms of our trend. If we are touching or below the blue
moving average than it’s generally a great time of thinking to get in (when EVERYONE is selling). To add some
more rules, we have the bottom of the chart with the RSI. Keep in mind this is on a monthly SPX.
Thus, what I like to do is if we are at or below on the 100 month AND reach one of the above levels, I take
action in a long term investment. I ONLY invest in things that I believe are the future, things I personally use
and personally love. Those are my criteria. Does GM fit in my portfolio? No, in my opinion they are not the
future but instead something like Tsla is a significantly better choice (in that industry) in my opinion and for
my portfolio.
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Now take a look at the top of the RSI, where we will now get into the selling side of these cycles.
1. First thing to look for? Divergence. You can practice identifying on the daily, then move to the weekly
and really focus on mastering on the monthly.
2. Second thing I look at is the RSI on the monthly:
Good – at or above 75
Great – at or above 80
Incredible at or above 85
QUIZ:
1. What is divergence?
2. When should you invest in both stocks and crypto?
3. What time frame to look at for stocks?
4. How are the crypto cycles and stock cycles different?
5. Why do I use the 100-month moving average?
6. What’s one key indicator that this stock crash is a bit different than the others?
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HOMEWORK!
you’re ready.
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