People don’t like it when I tell them we’re near the beginning of a new bull market in stocks. For some reason, they prefer that cozy feeling of going to bed thinking stocks are near an important high, and they’ve somehow outsmarted the system by selling stocks in uptrends instead of buying them.
I’m convinced some of these people must be looking at their charts upside down.
Anyway, let’s take a look at the markets so I can show you why I think we’re closer to the beginning of a new bull market and not near the end of an old one:
US Stocks broke out of a 21 month base. This is fairly obvious by looking through as many charts I do, but some people still fight me on this:
We’re seeing the same thing globally as well. Here is the S&P Global 100 Index absolutely ripping higher after clearing all that former resistance since early 2018:
Emerging Markets are breaking out as well. This is NOT a “United States Rally”. This is stocks as an asset class proving everyone wrong who’s been trying to bet against them:
Europe making new 52-week highs is not consistent with the recession fairy tales that the gloom-and-doomers keeping tell us:
It’s fun watching the frustration of the non-believers as European Banks continue to rip higher. This is arguably the most hated asset on earth. I still think they go much higher:
And as crazy as they think I am when I’ve been telling them European Banks have been a buy, they get even more upset when I tell them the bull market in Europe is just getting started. The lie you hear about stocks being in 10-year bull market is maliciously misleading. We would rather ignore those stories and focus on price instead. Here is the broadest measure of European Equities going nowhere for 20 years. By my work, this new bull market is still in the infancy stages and we’re going much higher:
The list of new 52-week highs keeps getting longer, not shorter. Healthcare continues to prove the power of trends:
And Medtronic keeps leading the charge out there. Medical devices in general, but $MDT is the poster child:
Here is Communications, where the largest 2 components are Google & Facebook, breaking out of an 18-month base to new all-time highs:
Industrials making new highs and coming out of the multi-year base is consistent with the start of a new bull market for stocks, and not near the end of an old one:
The one constant we’ve had all along is the leadership in Technology. They keep making new highs relative to the S&P500, so nothing new to see here:
Take a look at this breakout in Visa. The bet we want to make here is that $V is heading to 200 and we want to stay long if it’s above 180:
The Visa situation is just a breakout within an ongoing uptrend. Xilinx, on the other hand, is something we need to zoom out in order to see.
For me, $XLNX is only worth owning if we’re above the 2000 highs. If we’re below that then there is too much opportunity cost and/or downside risk potential. My number is 100. If we’re above 100, I think we have 50% of upside!
When we start seeing evidence that we should be getting more defensive, I will be happy to start taking the other side of most of these charts above. I’ve been very bearish before and I will be again. That’s a promise!
But for now, what’s the alternative to being long stocks? You’re going to own a yellow rock that’s still stuck below all that former support? That’s where the dead bodies are buried. They’re sitting there waiting to sell to you. Until the market proves that demand has finally absorbed all that overhead supply, I don’t see any reason to mess with it:
Commercial Hedgers agree. They currently have on one of their largest net short positions of all time. They’re not like a little bit short, they’re more short than they’ve ever been in history. Do you think they’re doing that because they think Gold goes up from here?
Meanwhile, Gold Miners are telling a similar story. Every time we hit this $31 level in $GDX the index sells off. Until the market proves it can hold above $31, there is nothing to do here from the long side. There will be plenty of time to get involved once miners actually break out:
Do you see what stocks are doing? Eventually Gold will be doing the same thing. But that’s just not the case yet. When you see 1580 in Gold and above $31 in $GDX, that’s when it will be time. You will most likely also see the Commitment of Traders report at less obnoxious extremes than they are today.
This is not a new thesis of ours either. Selling Gold in favor of stocks has been working for months.
Another alternative to stocks is to buy Bonds. Just like Gold is stuck below overhead supply, US Treasury Bonds are as well:
As long as bonds are below their 2016 highs, there’s nothing to do here from the long side.
You might not like stocks here, or have some how convinced yourself that they’re “too expensive” or “too high”. But when you zoom out on the world’s most important indexes and consider what the alternative to stocks might be, I don’t see why you wouldn’t want to be long equities here and selling the others.
When the data suggests adjusting this strategy, I will be more than happy to do so. That’s just not today.
Let me know what you think. What am I missing?