It’s no secret that JC and I are extremely bullish on stocks. Just like you’d like to see in a bullish environment, we’re being led higher by tech stocks. And there’s no better barometer of health in the tech sector than seeing old bellweather Microsoft still hanging around new all-time highs and cruising comfortably above it’s 200 day moving average. [Read more…]
Key Takeaways From My First CMT Symposium
From the Desk of Tom Bruni
Three weeks ago I had the pleasure of attending the CMT Association’s 45th Annual Symposium in the Financial District of New York City. In prior years I’ve lived vicariously through previous attendees’ tweets and blog posts, so this year I was equally nervous and excited when I decided to attend in person for the first time.
This year’s theme was “Navigating the Gap: Forces That Influence Price Dynamics”, which suggests that there’s a “gap” between the market price of securities and their intrinsic value and that technical analysis can help in navigating that gap by providing a way to analyze market behavior and the law of supply and demand. As market practitioners we know that markets are not efficient, which is why we all do the work that we do. [Read more…]
Sector Rotation Points To Higher Stock Prices
It’s hard for a mechanic to tell you what’s wrong with your car without lifting the hood to see what’s inside. In the stock market it’s no different. We often hear people giving a diagnoses of the market’s health simply by using the S&P500 or some other popular index. To me, that’s irresponsible. This is not a stock market, it’s a “market of stocks”. There are 500 stocks in the S&P500. The market is not a thing, it’s a lot of things.
Sector rotation is the lifeblood of any bull market. Some sectors are indicators of risk appetite while others point to risk aversion. Consumer Discretionary stocks include companies where we spend our discretionary income: retailers, homebuilders and autos for example. Consumer Staples, on the other hand, consist of companies that consumers would use regardless of whether times are good or bad. No matter how the economy is doing, we’re still going to drink beer, smoke cigarettes, brush our teeth, wash our dishes and clean our clothes. These types of companies are the Staples.
If you’re a buy side long only manager, you can’t short stocks and you can’t go to cash. The mandates of these mutual funds require managers to be long at all times. It’s the PMs job to outperform the benchmark, not necessarily to make money, just to outperform. The way they outperform in a bull market is to overweight Consumer Discretionary stocks relative to Staples. When stocks are falling, one way they beat their benchmarks is to overweight Staples over Discretionary. [Read more…]
Stocktoberfest East 2018 Chart Battle
From the Desk of Tom Bruni
This past Wednesday I had the privilege of joining 7 world-class Market Technicians in the Stocktoberfest East Chart Battle Competition. It was a lot of fun to share my work with the 450+ conference attendees and surreal to share the stage with people I’ve learned from since day one of learning Technical Analysis. With that being said, I was knocked out in the second round by Charlie Bilello so I’m writing this post to show all three of my ideas in their entirety. [Read more…]
Soy Much Opportunity In These Agricultural Commodities
From the Desk of Tom Bruni
Commodity strength has been a clear theme over the intermediate term, with the energy complex and base metals doing a majority of the heavy lifting in helping the CRB Index break out of its 2+ year range. The 41% of the index made up of Agricultural commodities has seen mixed performance, with Cotton and Cocoa leading and Sugar and Coffee struggling to put in any sort of meaningful bottom. However, there has been some improvement in the action in Soybeans and Soybean Meal, as well as Corn and Wheat which should support the CRB Index in moving higher. With that being said, this post is going to focus on the three Soy related commodities. [Read more…]
Forget ‘Sell in May’, What Did Stocks Do Since November?
I think seasonality is often misused. Although economic cycles, political climates and public markets are constantly changing, the behavior patterns of humans remain the same. I spend a lot of time studying cognitive behavior and markets and it is very clear how foolish humans can be, including the robots they build. We behave in specific ways during some parts of the year and completely different in others. Those cycles play a role in annual cycles.
One of the most popular, and misunderstood, is the old “Sell in May and Go Away”. But what exactly does that mean? Should we blindly enter the month of May with a bearish selling strategy? Does that sound like a good idea? Historically stocks are up for the month of May about half the time and since 1950 the S&P and Dow average a 0% return. June has a similar history of 0% average returns and positive return close to half the time. But that’s not really what we’re interested in here, which is my point.
We care more about what this “Sell in May and Go Away” saying means for rest of the year and what it says about the current behavior of investors? Remember, the reason this phrase is popular is because May is the beginning of the “Worst 6 months” of the year. More importantly, it’s the end of the “Best 6 months”. The reason I refer to it as more important is because we take the information we get during the past 6 months to help us make decisions about the next 6 months. Were stocks up during the November – April period? Did they do what they were supposed to do – rally? Or were there larger selling forces at work? [Read more…]
[Premium] Monthly Candlestick Analysis From The Top/Down
This is the most valuable analysis I do every month. When you sit there with some music on and just rip through monthly charts, it really gives you perspective. We’re taking a step back and reanalyzing the trends. It’s easy to get caught in the day-to-day noise. This exercise helps avoid getting whipped around. I encourage everyone to make their own list of Monthly Candles. [Read more…]
The Data Has Spoken: Buy Stocks!
I just got back from a week in New York City and here’s what I see: The winners keep winning, the losers keep losing, things keep getting better and people think they’re getting worse. I like that combination.
When I was 18 years old I moved to the New York area and spent a total of 15 years out there, most of which was in the financial space surrounded by entrepreneurs, traders, investors, analysts, fintech, traditional media and the biggest names in financial social media.
For the past 3 year’s I’ve lived in beautiful Sonoma Valley, CA in what some might describe as something of a bubble. I don’t watch financial television. I’m not ‘in the know’ about the daily gossip except for what I see on twitter. And even then, I don’t consume nearly as much of it as most people. I’m not at the Hunt & Fish club once a week, I don’t attend every book party in New York and I’m not surrounded by financial journalists every day. I’m out.
This can be a good thing or a bad thing. I worry about what some of the negative implications are from this strategy. That’s how I think: Risk Management. “How is this wrong?” is my concern. Why don’t other people live this way? Am I the weird one or are they the ones doing it wrong? As Jay-Z said, “If everybody’s crazy, you’re the one that’s insane”. [Read more…]
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