Fibonacci Analysis is one of the most valuable and easy to use tools that we have as market participants. I’ve studied supply and demand behavior for over a decade, and I find myself using Fibonacci tools every single day. These tools can be applied to all timeframes, not just short-term but longer-term. In fact, contrary to popular belief, technical analysis is more useful and much more reliable the longer your time horizon. Fibonacci is no different. [Read more…]
This doesn’t have to be complicated guys. Supply and Demand dynamics do not change. I keep hearing how this market is “algo driven” or whatever, but those algos are built by humans. Supply and demand is based on fear and greed in humans, whether discretionary or systematic. I think the debate about algos is a waste of time for all of us. Let the noisemakers, who aren’t trying to make money in the market, worry about that stuff. We’re here to focus on supply and demand. Period.
The S&P500 has struggled over the past week to continue this monster rally from last month’s lows. It should not be a surprise to anyone that we have struggled. Why? Because prices just ran into a ton of overhead supply. This correction is normal, and should be expected. Blame the algos if you want to sound smart in front of ignorant people at a cocktail party, but where I come from, we call this “normal”: [Read more…]
What do you guys think? Buy Canada and short America? Some of you might like the sound of that, others might hate it. Personally I don’t care either way. I treat Canada and the U.S. the same way as I would treat Indonesia, China, Peru, Soybeans, Cocoa, Japanese 10-year yields or Aussie Dollars. It’s just letters and math to me, so I don’t care if Apple doubles in price or goes to zero. The implications of market moves are nothing I can control or worry about. I’m just here to try and profit form the changes in price.
Today I want to talk about why I still think we need to be shorting America and buying Canada instead. This is one I’ve been pointing to since late January, but since then price has just confirmed everything that we were originally seeing.
Here is a 4-year chart of Canada’s TSX Composite Index vs America’s S&P500 Index. You can see this ratio trading lower within a nice clean downtrend channel for several years. More recently in the 4th quarter last year, price fell below the lower of the two parallel trendlines, only to quickly recover in late January. This also confirmed a bullish momentum divergence, as you can see plotted below:
This has been trending higher over the past 6 weeks and I still believe that the failed breakdown earlier this year will be the catalyst to continue to take this higher towards the upper of these two parallel trendlines. It looks like we’re heading back above 7 where I would take tactical profits and reevaluate.
Looking bigger picture, on the other hand, we could be at the beginning of a monster breakout. Here is a longer-term chart going back 20 years. This could be a logical area for this ratio to find support, as it did in 2000 and 2001. Also, we can see that momentum is also diverging positively. Over the past year, this ratio has made 2 lower lows in price, but momentum has put in a higher low on each one of those occasions:
If we can take out the upper of these two converging trendlines over the past 6-7 years, I would expect a big move higher, towards at least 8:1. I would continue to buy Canada and short America with equal nominal amounts. As long as we’re above the lower of these two converging trendlines, I want in!
Last night, Wednesday 3/9/16, was our Monthly Members Only Conference Call. If you’ve been considering a 30-Day Risk-Free Trial, now is the time. Join today to access the video recording of last night’s call.
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Tags: $EWC $TSX $SPX $SPY
Intermarket Day is one of my favorite days. Yes I’m a huge nerd. Deal with it!
This is when I go through many markets relative to each other. These markets include individual U.S. Sectors compared with the overall U.S. Stock market. We also look at other assets against each other like Bonds, Commodities and Currencies. We price Gold in other currencies, and change around denominators for both trade idea generation and also for informational purposes.
Here are some of the things that stood out from this week’s homework:
In this week’s members-only letter we discuss the following topics:
- Is the Mean Reversion Higher In Stocks Still In Play?
- What Do We Do Now That Treasury Bonds Hit Our Upside Targets?
- What It Will Take To See Apple, Twitter and Yahoo Rally This Month
- Where is the Euro headed next
- Why It’s Important To Define Your Time Horizon
- The Sectors That Will Lead In February
In honor of Superbowl 50, we created a countdown of what we consider to be the most important 50 charts in the world. These include U.S. Stocks and Sectors, International Indexes, Currencies, Commodities, Interest Rate Markets and Global Intermarket relationships. Some of these are more actionable than others, but collectively I think they truly tell the story of global market risk, or risk aversion for that matter.
Members of All Star Charts get access to all of this information 24/7, so we would like to invite you to start a 30-Day Risk Free Trial and Join us to see if our community is right for you. We have received incredible feedback from our members and will continue to improve the platform.
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Here is the video in full (audio begins immediately, video gets going after 30 seconds)…..Enjoy! [Read more…]
From the desk of Thomas Bruni @brunicharting
As momentum stocks breakdown, the Nasdaq 100 has begun to breakdown in a similar fashion on a relative basis.
This ratio broke out to new highs late last year and spent a few months consolidating before ultimately resolving to the downside. This violent resolution lower confirmed a failed breakout as well as a bearish momentum divergence. Prices have since broken through the uptrend line from the summer of 2014 and look to be heading for a test of the uptrend from the June 2013 lows. From failed moves come fast moves, so I wouldn’t be surprised if this ratio ultimately retests the breakout level near 2.0 which corresponds with the 61.8% retracement of the 2013-2016 rally.
There is much more to life that what the Dow did yesterday. Every week we go chart by chart looking at all of the major U.S. Stock Market Indexes. This analysis includes the S&P500, Dow Jones Industrial Average, Dow Jones Transportation Average, Dow Jones Utility Average, Nasdaq100, Russell 2000, Mid-Cap 400, Russell Micro-cap Index, etc.
All of these charts have been updated on both Weekly and Daily timeframes in the Chartbook and these are a few of my notes from this week’s analysis including some updated risk vs reward levels:
Please note: this is multi-timeframe analysis looking both long-term and short-term. Defining who you are as an investor [Read more…]
That was fun wasn’t it? S&Ps lost a cool 13% since the last week of 2015. You think that’s a lot? Emerging Markets lost 16% during that period. The Russell 2000 Small-cap Index lost over 17%. Micro-caps lost over 18%. 13 is nothing. And get used to it, because I think there is a lot more selling coming.
Today, we’re going to focus on what the S&P500 looks like because that is what all of you keep asking me about. I like to look at stock markets from a more global perspective, taking into account what other asset classes are doing like commodities, currencies and interest rates. Remember, I’m in the weight-of-the-evidence business. I believe that in order to navigate through what is a constantly evolving global marketplace, taking the weight-of-the-evidence is the best approach. But today, we’ll take a deep dive look at S&Ps on their own. [Read more…]
The Head and Shoulders experts are popping up everywhere these days. Never has there been a price pattern searched for or imagined in people’s minds more than the infamous Head & Shoulders Pattern. Funny, as much as they love to talk about it and as much airtime as it gets on the TV and Internets, it’s actually one of the more rare patterns driven by supply and demand. The reason it is so rare is because, by definition, it is a reversal pattern. Since markets trend, and ongoing trends tend to continue trending in their direction, by looking for a Head and Shoulders Pattern, you are doing the exact opposite of what we’re trying to do here in the first place: recognize trends.
As a simple definition, a Head and Shoulders pattern, in this case, a Head and Shoulders Top, is made up of two higher highs (the “Left Shoulder” and the “Head”), followed by a lower high (“Right Shoulder”). After each of the prior higher highs, the ensuing sell-offs should find support near [Read more…]