Salesforce, Amgen, and Honeywell were all welcomed into the Dow Jones Industrial Industrial average this week. And all three are being greeted by enthusiastic investors. (Especially Salesforce $CRM!)
While the first two names are in sexy industries, don't sleep on Honeywell $HON. Here's what JC said in a recent post on the new Dow additions:
Here’s a chart of Honeywell, which I’m not sold on yet. I think it does break out, but I think this is only something to be long if we’re above 165. Below that and there is too much opportunity cost, I believe.
Gold made new all-time highs this summer. That was pretty cool. Hadn't seen that in almost a decade.
Some people always like buying gold. They joined some secret society once where they convinced themselves it was part of a "diversified portfolio". I don't know what kind of strategy that is, but it was a really shitty one for a long time.
That all changed earlier this year when Gold Miners $GDX finally broke out above 31, which had been our key levels for years. And the metal itself broke out above 1580 or so which had been our equivalent level there.
Sector rotation has been driving the major equity indices across the globe higher, but they've all got one sector that's holding them back.
Today we're looking at that sector, Financials, to outline why this week's action is important and how we're approaching this segment of the market.
First, let's start with the Nifty Financial Services Index in India, which comprises about a third of the overall market's weighting. Prices have been struggling with this resistance level near 11,300 and are now trying to break out above it to new recovery highs.
On a relative basis, the index is trying to hold above long-term support against the Nifty 100 and turn higher. Outperformance, or at least in-line performance from the market's largest sector would shift this from a major headwind to a major tailwind for stocks as an asset class.
That's how I learned it. You'll hear my friend Ralph Acampora say that all the time!
"You Never Want To Fight Papa Dow"
My interpretation is that there is wisdom in the Dow Components. If you want to know which way the market is headed, focus on those 30 stocks.
I'm not going to get into the discussion about whether the Dow is the best index or not. I've made my case before and stand by it today more than ever. If you have a problem with Dow Jones or Standard & Poors, stop complaining about it and just go build a better index. It's not that hard. We do it every day.
The Dow Jones Industrial Average, however, is a perfectly good index and gauge of stock market strength or weakness. One of the best parts is that there are only 30 components!
Hellooo??? Do you want to go through 500 stocks? Or 3000 in the case of the Russell3000?
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
Today we're updating the chart of USD/INR which we've been monitoring for the last few months and discussing the implications of this breakdown finally *potentially* confirming.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we're watching in order to profit in the current market environment.
This week, we're going to highlight a number of critical Stock Market Indexes and Sectors, as well as assets in the FICC Markets that are approaching logical levels of overhead supply and pose the question... "Are risk assets due for some corrective action or consolidation?"
I think whether you're bullish or bearish, we can all agree that if the world is coming to an end, financials will be front and center leading the march down to zero.
It is undeniable that the current market environment is rapidly weeding out companies that cannot survive in a digital world, and handsomely rewarding those that can.
And it isn't always the super high tech, VC-backed, trendy startup company that benefits. There are plenty of "old-school" names positioning themselves for the new reality of commerce in our new world. Thankfully, we don't need to be "futurists" who can predict the future of social, economic, and government trends. All we need to do is keep a careful eye on where investors are allocating capital and the resulting price action tells us everything we need to know.
Our trade idea today is in one of those old school retailers that's reinventing itself in new school ways.
Welcome to this week's edition of the 'Louis' Look' column.
Every week I write a piece documenting what I'm learning through my internship at All Star Charts. You can read the previous post here. This week's edition is a shorter one to keep on today's theme of simplicity, so let's jump right into it.
JC, What do you mean rotation into the Dow Jones Industrial Average?
This is a bubble!
It can't possibly be the beginning of the Dow's move.
Wait, can it?
Well, despite all the hype about a bubble and the ridiculous rhetoric about a dislocation between wall street and main street, the Dow Jones Industrial Average hasn't really done much the past 10 weeks. It hasn't made much progress at all, even if you include the past 2 weeks of gains. In fact, the last 2 weeks are all the gains since early June.
Meanwhile, the Dow Jones Transportation average has been the leader and broke out above those former June highs a while ago:
