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All Star Charts

Expert technical analysis of financial markets by JC Parets

Keep Your Eyes on Prior Cycle Highs

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From the Desk of  Ian Culley @Ianculley

The market environment has been shifting in favor of the bulls all summer.

Breadth thrusts are firing as participation beneath the surface expands. Risk assets – commodities and stocks alike – are reclaiming critical levels of former support. And our bull market rebirth checklist is triggering four out of five of its bull market criteria.

This is a huge departure from earlier in the year.

But one aspect of the environment remains the same – interest rates. Yes, rates have come off their June peak. And yes, US yields have paused at a logical level marked by a series of former highs. That’s all true and makes perfect sense.

But we still find ourselves in a rising rate market as the underlying uptrend remains intact – for now.

[Read more…]

This Rally Have Legs?

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We never actually know that we’ve been in a bull market until well after the bottom.

It’s easy to look back and pinpoint the March 2020 low or the March 2009 low, for example, and say, “That’s when the bear market ended and a new bull market started”.

But in real time, when we’re going through that transition, how can we possibly know?

Well, classic signs of the end of the bear markets are things like historically bearish sentiment extremes and washout breadth levels.

We obviously had both of those as our sentiment readings this summer were the most pessimistic since the Great Financial Crisis, and only 14% of stocks on the NYSE were in uptrends (compared to almost 90% entering 2021).

Those are the things you see just before the market turns.

Now, what are the things you see just after a market turn, around the 2nd inning or so?

Momentum thrusts.

Relentless buying pressure coming off historic selling. And that’s precisely what we’ve been seeing over the past month.

Here’s a chart showing the average performance of the S&P500 from 6 months prior to 12 months after a Momentum Thrust Signal: [Read more…]

2 to 100 Club (08-17-2022)

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From the Desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we’ve been working on internally is using various bottom-up tools and scans to complement our top-down approach. It’s really been working for us!

One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn’t just end there.

We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey to becoming the market behemoths they are today.

When you look at the stocks in our table, you’ll notice we’re only focused on Technology and Growth industry groups such as Software, Semiconductors, Online Retail, Solar, etc.

Then, like any good technician, we filter the list down to those closest to new highs.

This allows the cream of these strong groups to rise to the top and helps streamline our mission to identify technical breakouts in the top-performing stocks.

[Read more…]

[Options] Long(er)-Term Health

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During our morning Analyst meeting today, the team was looking across a variety of asset classes and sectors to identify the current leaders, and those likely to continue tracking higher if the broader stock market rally is for real.

One sector that stood out starkly was Big Pharma.

There are some monster bases in the process of resolving higher here.

[Read more…]

Let’s Talk About Price Action and Self-Fulfilling Prophecy

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From the Desk of Louis Sykes @haumicharts

One of the common criticisms of technical analysis is that it’s all self-fulfilling prophecy.

Its proponents argue that technical analysis doesn’t work by understanding underlying supply and demand dynamics.

Rather, it operates on a single dimension, where market events are caused either directly or indirectly by a preceding prediction by technician that it was going to perform a certain way.

An intuitive example of the self-fulfilling prophecy hypothesis (SFP) is the classic technical analysis principle of support and resistance.

Those who favor SFP argue that markets only sell off at resistance and bottom at support because other traders identified these levels and acted according to technical analysis principles.

After all, a self-fulfilling prophecy is defined as a person or a group’s expectation for the behavior of another group bringing about the expected behavior.

Within the industry, arguments like these tend to get hyperpolarized and over-divisive. That’s not surprising considering there’s still a cohort of investors that argues technical analysis is like astrology — completely worthless and of no substance.

So, as it is with most things in life, the truth is somewhere in the middle.

[Read more…]

Young Aristocrats (August 2022)

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From the Desk of Steve Strazza @Sstrazza

Dividend Aristocrats are easily some of the most desirable investments on Wall Street.

These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.

As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.

Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats.

In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for five to nine years.

We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money.”

Imagine if years of consistent dividend growth and high momentum and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.

By adding our technical analysis to the mix, the Young Aristocrat setups give you the opportunity to own the best of the market’s future blue-chip winners before they become must-own household names.

Often, the strongest performers in this universe and even the Aristocrats themselves pay relatively small dividends.

This is usually because the stock appreciation makes it tough to keep up with the payout — even for companies that consistently grow their yield in the double-digits!

For this reason, we don’t have a minimum threshold for the dividend. What we’re really doing here is creating a list of quality stocks based on their ability to persistently grow their shareholder return.

And maybe the best part? This list is not just designed for long-term investors.

Any kind of investor or trader can use this list as it helps generate ideas across all time frames, even the short term.

Remember, some of the most important filters we use for this list are momentum, relative strength, and proximity to new highs.

[Read more…]

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