When assets are in strong uptrends, they’re not just going up in value on an absolute basis, they also outperform their alternatives. Two obvious alternatives to investing your money in Gold are Stocks and Bonds. With the price of Gold flirting with new multi-year highs, we want to see how it’s behaving vs the other asset classes. [Read more…]
It’s hard to ignore the strength we’re seeing in some of these emerging markets. When stocks are selling off, I like to look around and see who is still holding up well. We call that “relative strength”. Every day I get to speak with traders at the largest financial institutions in the world. They laugh because when everyone is selling, they get to sit there pressing buy buttons and fill their humongous orders that need to get done while they are accumulating a position.
Remember that institutions who manage $10, $20 – $50 Billion have to buy millions of shares of a stock just to have a small position relative to the overall size of their giant portfolios. It takes time to fill an order: days, weeks or even months. Retail investors can just press one button and get an entire fill whenever they want. Since institutions can’t, we get to see it happening if we look close enough. When stocks are selling off, those still staying green and holding up is evidence of buy side accumulation.
Today I want to talk about some of the emerging markets out there where we’re seeing relative strength. It’s impossible for me as responsible market participant to ignore what is happening in this space. Also, you guys count on me to put in the work and point out what stands out. [Read more…]
How can this not be the chart of the week? It should be the chart of the century. Everyone always likes to talk about bubbles and how everything is in a bubble. But what they’re missing is the implications of said bubble popping. Remember we’ve seen price bubbles before, lots of them. One thing you’ll notice is that the bigger the fall in price, the longer the time necessary to repair it.
After 1929, the Dow Jones Industrial Average fell almost 90% from its peak. It took 25 years to finally exceed that level for the first time. Towards the end of 1954, the Dow was able to make a new high and then continued higher for another 12 years before the next secular bear market began. It took a long time to repair that 90% crash, 25 years in fact. This is normal. But what is also normal is that from that repair came another 150% rally after initially exceeding those prior highs.
We’re seeing similar activity today in Technology. After peaking in March of 2000, this sector index collapsed by over 82%. It wasn’t until the past few months that we have finally been able to break to new all-time highs: [Read more…]
We want to be buying stocks. I don’t think I can be any more clear about that.
You guys know me as the obnoxiously bullish guy the past couple of years in the midst of “unprecedented pessimism”. I’m willing to admit that I have an unfair advantage that I just pay attention to price and purposely ignore everything else that most of you have to endure. This focus has allowed me to see clearly what is actually taking place instead of assuming that who I’m listening to or reading knows what’s going on.
Today I want to show you guys one single chart that I think tells the story of what the hell is going on here. It is awfully difficult for me to be bearish of stocks if the most important sectors in America are not just making new highs, but also breaking out to new relative highs. These leading sectors aren’t just doing well, they’re outperforming the rest. [Read more…]
There is no denying that Technology has been a leader over the past 18 months. It’s amazing how much this historic breakout in Tech was completely ignored in 2016 since U.S. elections are much sexier and help news people sell ads. “Forget the relative breakout in Tech, how does what Trump or Hillary said on the twitter today impact your portfolio?” You see the difference? We’re not here to entertain or sell ads to sponsors. We’re here to try and make money in the market.
In September of 2016 I was pounding the table about this monster 15-year base in Technology relative to the S&P500. There was no question that the path of least resistance was higher. As they say, the bigger the base, the higher in space. I encourage you to check out exactly what we were seeing at the time. Technology is up close to 50% since then while the S&P500 is up just about half that, 25%. So now the question is whether or not Technology, which has the largest weighting in the S&P500, is due for a breather, or does it still have room to run?
Brazil just closed at an all-time daily and weekly closing high. These are not things we normally see in downtrends. Russia’s MICEX also closed at new all-time highs. There is some serious strength coming from Emerging Market stocks and the data is still suggesting there is a lot more upside left out of this group. I think we’re just getting started.
Today we’re taking a look at some equally-weighted emerging market indexes that I put together and compare this group to other alternatives, like U.S. stocks and other developed markets such as Japan and Europe. There is an overwhelming theme here of rotation into Emerging Markets after years and years of underperformance. 2018 is a new year and emerging markets are leading us higher. [Read more…]
Financials ripping to all-time highs is not something we see when stocks are in a downtrend. To the contrary, this is strong evidence of risk appetite for stocks. This seems to be something that is being underappreciated right now but I think is worth pointing to, again.
There are a lot of questions about the sustainability of the uptrend in stocks. Some might even say that stocks are “stretched” or have gone “too far too fast”. But when you look at Financials, they’re just getting going now. From many different perspectives, this sector has done nothing for a long time and is just now breaking out. [Read more…]
Long Precious Metals has been a big theme for us this year. I still think this is an area we need to be involved with and the weight-of-the-evidence is suggesting higher prices for the entire space.
Today I want to point out the recent breakout in Swiss Franc Futures. Historically there is a high positive correlation between this contract and the price of Gold. As we break out to new multi-year highs in Swissy, Gold looks likely to follow along: [Read more…]