May Monthly Charts: What We Learned

JC Parets
May 31, 2020

Friday was a great day in my life. Not only did we get new Weekly Charts, as we normally do on Fridays, but we also got a fresh batch of Monthly Charts to analyze as well. These are all great developments for a team like ours, so driven by data. It's like a little mini-Christmas of data, for us to dive in to.

"Whenever in doubt, Zoom out", is how I learned it. The beauty of Monthly Charts is that it makes it impossible to ignore the primary trends. And that's what this is all about.

I like taking notes when I'm doing my chart reviews, Monthly's or otherwise. Here are a few things that stood out:

First of all, the Nasdaq Composite went out at new all-time highs, US 10yr Treasury Bond Futures went out at new all-time highs, and Gold & Silver went out at new multi-year highs.

My question here is, Who's NOT making money in this environment?

Also on the new all-time monthly closing high list:

  • Technology Index $XLK
  • Semiconductors Index $SOX
  • Communications Index $XLC
  • Internet Index $FDN
  • Healthcare Index $XLV
  • Biotechnology Index $XBI $IBB
  • Medical Devices Index $IHI
  • Software Index $IGV
  • Cloud Computing Index $SKYY
  • Online Retail Index $IBUY
  • IPO Index Fund $IPO

What do we know about all-time highs? We know they are not characteristics of downtrends.

A lot of you will recognize most of these Indexes. The stocks that have been showing up on our bullish scans since early March can mostly be found inside of these categories

You know what is NOT making new highs, or anywhere near it for that matter? European Banks.

But you guys who have been around a while hear me constantly saying the following: "The Bulls don't need European Banks to lead, they just need them to stop going down":

Don't look now, but if the European Bank Index fund is able to get above its 2011-2012 lows, which were also the lows in 2016, the squeeze could really get going.

What if European Bank Stocks are ripping higher? What does the market environment look like in that scenario? Are stocks likely under pressure? Or are stocks in general likely heading higher? I'd bet on the latter.

Bringing things back home, 3000 is a big level for the S&P500. If we're above that, it's hard to be too pessimistic. A scenario where the S&P500 is above 3000 is likely one where we should be spending more time looking for stocks to buy vs looking for stocks to sell:

The leaders are doing their thing. This is nothing new, but new all-time highs for the Nasdaq100 has to be encouraging for even the biggest stock market bulls:

Here is a custom equally-weighted index we built of the largest 10 stocks in the U.S. by market-cap. This index just went out at new all-time monthly closing highs:

This is one of the most valuable parts of our entire process: The Monthly Chart Review. It takes me about half an hour, and I only do it once a month. This is the best 6 hours of work I put in every single year (30 min x 12 months). I tell you this from the bottom of my heart.

The Monthly Chartbook is updated here (Premium) with all the charts:

I encourage you to make your own list of your most important charts. These above are mine.

What did you find in your Monthly review?

Share it with us here.

JC

 

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