US Stocks Fail At Major Resistance

JC Parets
June 27, 2020

We take a consistent intermarket approach to stocks. Not only do we analyze all the Stock indexes, both domestically and around the globe, but we also compare stocks to other asset classes. This is historically very helpful information to determine the direction of the primary trend for stocks.

Today, we're taking a look at stocks running into major resistance relative to its alternatives. More specifically, stocks are failing relative to both Bonds and Gold.

As you can see in this chart, we saw significant support near this gray shaded area in late 2018 and then once again in August of last year. This "Support" finally gave way and broke in early March, almost 4 months ago. This former "Support" has now turned into "Resistance" throughout June:

Click on Chart to Zoom In

This process of support turning into resistance (and vice versa) is classic polarity.

We never truly know if the market is going to recognize our principles of polarity, but it usually does, and this time was no different. It's up to us to either take notice or you can choose to ignore it.

Last week we took a look at Financials flirting with significant support. They finally broke down this week.

So what are we doing about it?

Well, that all depends on who you are, your objectives, risk tolerance and time horizon. For us, we're staying disciplined to our key risk levels. We are taking profits when our upside objectives are hit, like $DOCU this week for example.

That's our plan. What else are we doing? We're watching this new resistance from former support in the S&P500 relative to both Gold and US Treasury Bonds.

Gold is working very well for us, so we're all for Gold continuing to rise. Nothing new here...

Bonds have been stuck in a range, but definitely have our attention as US 5-yr Yields just went out at new all-time lows:

In the meantime, we want to be buying stocks that are going up. We're looking for relative strength and positive momentum. These strategies have worked and we will continue to look for isolated opportunities that have the potential to appreciate regardless of what's happening at the stock index level.

Markets are a mess. That hasn't changed. If anything, they got messier this week.

What are you seeing out there? What am I missing here?

JC

 

 

 

Filed Under