Market Levels Part II: Risk vs Reward

January 17 post had this chart and suggested we would reach the levels in the highlighted area. Now that we are solidly in that range, what next?

This Dow Jones chart from January 17 suggested after an up move, we would revisit the levels highlighted.

The part of Technical Analysis that is more of an art than a science will always tell me that these levels are not exact. But when they are reached, it confirms that the next group of indicators will help with what may be next. So here is what we see now based on the same Dow Jones chart updated through current date:

Current view of Dow Jones showing a few levels below we will keep in mind

When fear and panic get situated into the market, it offers a great scare but also a great possible chance to 'buy low'. "In every difficulty lies opportunity". I have kept this quote near my desk. What we see now is a possible downside towards the red line. about 5%. This may not be reached. But it is our denominator in our calculation of upside to downside. The upside is simply getting back up to the highs and beyond - a level near 50,000 on the Dow. That leaves us with a 'Reward to Risk ratio' of about 5x at current levels.

What to do? Leave the buying to us. We have been able to continue our buying of equity through yesterday and have a plan to keep it going in the event we drop another 5%. We believe the following rally will be worth the wait! Hang in there and call us to keep calm and carry on!

Author: Steve Economopoulos

Published: 3/14/2025

Click Here to return to Everything Econ

Do you want to stay In Touch with Steve? CLICK HERE to have his new blog posts sent directly to your email inbox.

Important Disclosures: The specifics of the activity presented by the EWM Asset Management team is intended for general information only. The actual impact to your personal portfolio is not represented by the statements made in this document and you should proactively review your monthly/quarterly statements or contact the office to speak to an Advisor to validate your specific transactions. Any charts, graphs, or visual aids presented herein are intended to demonstrate concepts which cannot be fully explained without the assistance of a professional from EWM. Readers should not in any way interpret these visual aids as a device with which to ascertain investment decisions or an investment approach. Only your professional adviser should interpret this information.