April Monthly Strategy Session: 3 Key Takeaways
1. A Hot Mess Within A Structural Uptrend
Despite the stellar performance from US Large-Cap Growth, most major stock market averages and indexes have been an absolute mess for the past several years. Even longer for a lot of developed International markets...
Although, we've gradually seen this change as more and more markets have resolved higher since last year. When we zoom out it's clear the trend is definitely higher for stocks over the long run... and not just those in the US.
Last month the NYSE Composite Index finally closed at new all-time highs. It was one of the last major indexes to break out. This makes sense due to its high exposure to global equities which have really picked things up from a leadership perspective of late.
As for the US, the S&P 500, Dow Jones Industrials, Dow Jones Transports, and even the tech-heavy Nasdaq 100 not only made new record highs again last month - but they've been doing so for a while.
The NYSE is just the latest to join the club.
2. Searching Google For A Trend Resolution
Though the uptrend is still in place, from a tactical perspective the market remains challenging. Sideways consolidations and choppy conditions are the norm.
With that said, regardless of the environment - there will always be individual winners and losers. Here is one that we think could be a major leader in the future and demands our attention... this is Google $GOOG.
However price resolves from this tight continuation pattern in GOOG will be telling. If one of the largest companies in the world is breaking down that doesn't bode well for the overall market. The opposite is true if we see price resolve higher here.
And an upside resolution is exactly the bet that we're making. For stocks in strong primary uptrends like this one, bullish flags or pennants should be given the benefit of the doubt, which in this case is to resolve higher, in the direction of the underlying trend.
Another thing we love about this name is that we're definitely fishing in the right pond. Communications has been on absolute fire, and Google is the largest weighting in the sector.
3. Europe Is Breaking Out
We've been pounding the table on the rotation into value and cyclicals, and what this means for European Markets, especially considering their high relative exposure to the Financial and Industrial Sectors.
Last month the Europe 600 Index broke out of a 20-year base. Europe has gone nowhere for twenty years, until now.
Sort of how Financials just broke out of a nearly 15-year base. Both are incredibly bullish developments and it is no coincidence at all to see them occurring around the same time.
Europe finally breaking out is not only bullish for equities around the world but also supports our themes of broadening global participation as well as the strong rotation we see taking place within US markets.
So as we take a step back and look at the broader picture, there are plenty of signs that suggest world equity markets are in the early innings of a new bull cycle. Seeing capital shift in favor of non-US markets also supports the idea that this rotation into cyclical areas is not just a fleeting development. In fact, we think this is all just getting started.
Those are some of the main takeaways from this month's strategy session.
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Thanks for reading and please let us know if you have any questions!
Allstarcharts Team