From the desk of Tom Bruni @BruniCharting

At the beginning of May, we put out a note about the failed breakout in many of the major indexes and why a more cautious stance was warranted for US and global equities. The divergences we were seeing slowly add up had finally been confirmed by price and we raised cash and stepped aside.

Since then, patience has paid if you let it.

Lack of trend, not just in the US, but globally, has been THE theme.

A month later, let's look at what's changed since then and if our gameplan needs to be adjusted at all.

From the desk of Tom Bruni @BruniCharting

The US Dollar has frustrated the majority of market participants this year, particularly if they're only looking at the US Dollar Index.

With that said, we've been focused on other US Dollar pairs that aren't getting much attention but are trending well and providing us with plenty of opportunities.

From the desk of Tom Bruni @BruniCharting

We've been writing about the lack of trend in the Major Indices and highlighting some relative strength in places like Software and Insurance, but overall signals remain mixed.

This morning I set out to write another post about areas showing relative strength, hoping to find a clean theme that the most actionable stock setups fit within.

What I found can be boiled down to the length of two tweets.

"Going through the S&P 1500 I see a number of actionable names on the long side, but they don't all fit a theme. They're all from different areas of the market. Where there are themes I see a lot of extended names and unattractive entries."

and

"I can see that the path of least resistance is higher in a lot of names, but that doesn't mean that current levels offer an attractive entry."

Great themes, but no great way of executing them.

or

From the desk of Tom Bruni @BruniCharting

Wednesday's Mystery Chart is one of my favorite right now, so thank you everyone for your feedback and participation.

I received a lot of answers, but most of you were skeptical of the breakout and wanted to see more before getting involved. A few others wanted to be long with a tight stop and few, if any, were sellers.

With that as our backdrop, let's get into it.

The actual chart was the ratio of the Insurance subsector ($IAK) relative to the S&P 500, which is breaking out to 11-month highs as momentum gets overbought for the first time in nearly 2 years.

To me this looks like a textbook trend reversal, so while there may be some backing and filling over the near-term, Insurance stocks look set to outperform over the intermediate/long-term.

Click on chart to enlarge view.

These are the registration details for the monthly conference call for Premium Members of All Star Charts. In this call we will discuss the global market environment and how to profit from it. As always, this will include Stocks, Interest Rates, Commodities and Currencies. The video of the call will be archived in the members section to re-watch any time and the PDF of the charts will be made available as well.

This month’s Conference Call will be held on Monday May 13th at 7PM ET. Here are the details for the call:

With the Chinese Internet Index closing at new 7-month highs this week, have we seen the move already, or are we just getting started?

One thing we know for sure by studying history is that stock prices trend. That's why Technical Analysis works. These tools help us identify those trends. Many academics will tell you that these consistent series of higher highs and higher lows over time are just random. The truth is you can show these charts to a 5 year old and the kid will tell you that yes, this stock is going up, or no this stock is going down. You can even argue that a trend is sideways, but that is trend recognition nonetheless.

It's very clear that markets trend, particularly stocks. They go up over time and they go down over time. A stock making new highs has a higher likelihood of continuing to make new highs vs turning around and beginning a new trend. An object in motion tends to stay in motion, is how Newton taught us. It's the same in stocks, which are driven by e-motion. (See what I did there?)

From the desk of Tom Bruni @BruniCharting

Canada, like a few other Major Indexes from around the globe, continues to churn around all-time highs. So which way will it resolve?

Let's go sector by sector and see what the weight of the evidence suggests, just like JC did for US Stocks.

First, let's start with the TSX Composite, which continues to hover near its 2018 highs as momentum diverges. After a ~20% rally off the December lows and the presence of a flat 200-day, it would be healthy to see some consolidation at current levels before breaking out

Click on chart to enlarge view.

It's that time of the month again. This is when we take a step back, reevaluate everything we just saw the past 4 weeks or so, and come back home to the longer-term charts. Life is easier when we're not fighting big trends. While it's important for us to try and identify price levels that could act as support and resistance, this exercise is to determine whether these assets are going up, down or sideways.

Regardless of our time horizon, I think it's important to take these 30-60 minutes a month to acknowledge the bigger trends. Once this is done, then we can work our way down to weekly and daily charts for execution purposes. I say it all the time - My Monthly Candlestick Review is the most valuable 6-10 hours of work I put in each year.

You can see the updated monthly charts for yourself here

This is what stood out this month:

From the desk of Tom Bruni @BruniCharting

Last week in our note to Institutional Clients we highlighted the potential for mean-reversion in the relative performance of Small and Micro-Caps, driven by rotation into Financials and Healthcare.

Below is a chart of the Micro-Cap Index (IWC) relative to the S&P 1500, confirming a failed breakdown and bullish momentum divergence. As long as prices are above 0.1405, this ratio looks ripe for some mean-reversion to the upside.

Click on chart to enlarge view.

Same goes for the Russell 2000 relative to the S&P 500, failing to hold its new marginal low as momentum diverges.

From the desk of Tom Bruni @BruniCharting

With another potential failed breakout in the US Dollar setting up, here's the metals trade we're putting on.

From the desk of Tom Bruni @BruniCharting

While we wait to see whether or not this retest of all-time highs is a successful one, we want to define our risk on the long side in individual names that continue to lead the market higher.

One subsector that remains a consistent source of these setups is Software.

Below is a chart of Software relative to the Technology Sector overall, finding support right where it needed to at our previous price target. Whether prices can get back to their year-to-date highs will be an important tell, but for now the uptrend in this ratio remains strongly intact.

Click on chart to enlarge view.