For someone who uses Dow Theory every single day, it’s not something that I write about much. I may indirectly reference certain tenets all the time, but rarely do I write specifically about the 130 year old Dow Theory. I think I pretty much laid it all out earlier this year in my post: 5 Things Every Investor Should Know About Dow Theory. The simple minded choose to stick to the Dow Jones Transportation Average and Dow Jones Industrial Average either confirming each other or diverging from one another. And while this may in fact be a one of Charles Dow’s tenets (although they were Railroads back then, not the Transports we have today), it does not even make it into my top 5 most important tenets. [Read more…]
[Chart Of The Week] Technical Analysis On The S&P500
You guys know that I consider the S&P500 to be just one index in just one country in just one asset class in the entire world. There is a lot more out there. And while this might be true, I would also argue that this one index is one of the more important ones that we need to be watching. It is a good representation of U.S. Stocks, since the Dow Jones Industrial Average is just 30 names, the Nasdaq is tech-heavy and the NYSE Composite has a lot of international exposure. One can argue that the Russell3000 is the best representation of the U.S. since it represents over 98% of all investable assets in U.S. equities, but there is no liquid asset to gain exposure to it.
So today we are breaking down the S&P500, setting price targets and defining our risk management levels: [Read more…]
[Chart Of The Week] The End Of The Worst Time Of The Year For Stocks
It’s important to recognize what type of environment we’re in for the market. During different times of the year, traders and investors tend to behave in certain ways. When you smooth out the data over many years, their patterns become clear. We all hear about, “Sell in May and Go Away”, but what about, “Remember to Buy In November”?
Today we’re focusing in on the end of what is historically the worst seasonal period of the year for the Dow Jones Industrial Average. So what happens next? [Read more…]
[Premium] Weekly Open Letter About The Current Market Environment
In this week’s members-only letter we discuss the following topics:
- What Is The Bullish Case For U.S. Stocks
- Why I Am Still Leaning Towards The Bearish Side For Stocks
- My Favorite Short In U.S. Stocks
- Why We Want To Be Long Volatility
- What The Relative Strength In U.S. Banks Means To Me?
- Why Commodities Have Been The Best Place In The World
- What If The U.S. Dollar Rallies?
- What Do We Make Of The Historic Extreme Bullish Sentiment In Bonds?
[Chart Of The Week] U.S. Stock Market Breadth Has Weakened in April
When the major U.S. Stock market indexes are making new highs, you want to see the list of stocks making new highs increasing along the way as well. This had certainly been the case throughout February and March, but has come to a complete halt this month. Looking across the board, the S&P500, Dow Jones Industrial Average, Nasdaq 100, Russell 2000, Mid-cap 400, etc have all made new recovery highs over the past couple of weeks, since our epic bottom in late January/early February. The problem is that 1) all of our upside targets have now been achieved where we wanted to take profits and 2) breadth in the market now stinks. [Read more…]
Why We’re Back To Tactically Fading Strength
From the desk of Thomas Bruni @BruniCharting
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The weight of the evidence has been building in favor of the bears over the last week or two, making the US equity weakness this week anything but surprising. Throughout the duration of this post I’ll outline the evidence that I’ve been noticing over the last two weeks and what it means for us as market participants moving forward.
Yen Strength – The Yen broke out structurally late last year and hasn’t looked back since. Tactically my upside targets were hit this week, but structurally this market has a lot more room to run. Given the high negative correlation between the Yen and US equities, this should continue to be a headwind for equity markets going forward. [Read more…]
[Chart Of The Week] This Important U.S. Stock Index Is Breaking Out
We’ve just witnessed one of the most epic rallies in the stock market that we’ve seen in a long time. Remember, this has been dominated by global indexes, particularly Emerging Markets, not U.S. Stocks. We could not be happier to see this rally progress so well as we’ve been pounding the table to be long since late January. By mid-February, the U.S. and other developed markets put in their bottoms and started to play catch up to the rest of the world. But the underperformance of the U.S. has continued anyway.
Today’s Chart Of The Week represents what could potentially be the start of a major structural improvement for U.S. Stocks: [Read more…]
[Premium] Weekly Open Letter About The Current Market Environment
In this week’s members-only letter we discuss the following topics:
- What Do We Do With The U.S. Indexes Now? S&P500, DJIA, etc
- The Best Trade In Precious Metals: Gold & Silver
- About That Squeeze Higher in Chinese Stocks
- My Favorite Energy Trade Today
- What Are We Going To Do About This Messy Bond Market?
- The Best Tech Stocks: Apple, Microsoft, Google or Facebook?
- What Does The Weight-Of-The-Evidence Suggest About Risk-Appetite?
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