The Chart Heard Around The World

This chart is a beautiful microcosm of what happened underneath the surface in stocks since February: Sideways to lower.

Back in February, Emerging Markets peaked, the IPO Index peaked, Biotech stocks peaked, the Nasdaq New Highs list peaked, and as you can see up top, Small-caps stopped going up.

If you're only looking at the Major Large-cap Indexes, you may have missed all that.

Now with that said, a big fuss is being made of what we saw this week.

But when you zoom out, the S&P500 just had 1 down week after making a new all-time high:

Meanwhile, the Dow Jones Industrial Average is still above those former highs from May.

If you recall, May is when the NYSE new highs list peaked, Financials peaked, Industrials peaked, Transports, Materials, and NYSE Advance-Decline line all peaked.

Hence the Cash & Champagne approach this summer.

But the Dow is still above those key May highs:

And so is the Dow Jones Transportation Average.

We're still seeing higher highs and higher lows.

As long as we're above those May highs, I don't see a major problem:

But all big problems start out as little problems.

The Small-cap Index failed miserably. That's definitely an ugly one.

What about Crude Oil? This one is pretty nasty too:

But Energy stocks are still above those key 2016 pivot lows.

As long as that's the case, Energy (like the Dow Industrials & Dow Transports) is still innocent until proven guilty.

Energy stocks were positive for the week, despite Crude Oil falling by double digits.

Crude finished the week down over 10%, but both the Energy Index Fund $XLE and the Oil & Gas Exploration & Production Index Fund $XOP closed positive for the week:

I don't know what's going to happen next.

But I do know what the market would need to do to get us much more cautious. And I know what the market would need to do to get us much more aggressive from the long side.

And that's all we can control. So that's what we focus on.

In the meantime, we need to trade what's in front of us.

Nothing good happens under 4500. Small-caps failing (maybe just temporarily) is one thing. The S&P500 losing 4500 and falling below the September highs?

We call those downtrends.

If the market is going to hold, and we're going to be buying stocks this Winter, we want to make sure we're fishing in the right places.

You can find my list here.

Let me know what you think.

December Strategy Session

We do this at the beginning of each month. We zoom out, take a step back and identify the primary trends.

I couldn’t think of a better time to do this, considering the current market action.

I’ll be hosting this month’s live call on Wednesday December 1 @ 6PM ET. Premium Members can register for that here if you haven’t already!

Can’t wait for that. We have a lot to discuss!

Tech stocks! Energy! Gold! Interest Rates! Stocks showing relative strength.

Really looking for to this one.

See you then!