Every week we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Being Independence Day weekend, we're going to highlight the continued structural outperformance from the US vs rest of the world in this week's post. As a good patriot and technician, I would be remiss not to take this opportunity to reflect on how grateful US investors should be.
Here are our US Index ETF and Global Index tables.
After some brief strength following this post, we're seeing the US Dollar continue to weaken...which raises the question of whether it's losing its leadership position against the world's major currencies.
I've learned a lot of things and met some amazing people during my trips to India over the years. One of them is the original meaning of the word "Guru".
You see, in America it definitely has a negative connotation. Most people I speak to don't even know what "guru" actually means. For us, it's usually a charlatan-type that no one likes. They usually know less than most and typically do much more harm to their audience than good. You'll often see them buying twitter followers and spamming your LinkedIn messages.
In marketing parlance, they refer to the "Guru" as the guy (usually male) who they spend all their time on marketing and making them look good. The better and smarter the “guru” appears to be, the more money that comes in, and the more profits for the marketing company, regardless of how completely full of it they actually are.
In America, whenever you hear, "Financial Guru", usually you want to run away as fast as possible.
I find myself on Zoom calls all the time. How about you?
Did you notice that the Communications Index is pushing up against new all-time highs? Did you notice that during the March decline, communications held above their late 2018 lows?
I think all of this points to us paying a little more attention to what's going on in the space.
First of all, check out the Communications Services Index holding above former resistance the past 2 years. That alone is impressive. If we're above 272, there is no reason to be pessimistic about Communications Stocks:
In early May we outlined the "Five Bull Market Barometers" we're watching to identify the beginning of a new bull market in stocks.
If you haven't read our initial post linked above, we'd encourage you to check it out so you understand what the rationale behind these five indicators is.
Now, let's see where these indicators ended the week.
One of the things that really caught my attention during our Monthly Chart Review for June was that the Nifty Auto Sector is approaching resistance on an absolute basis, as are some of the sector's largest components.
In this post, I want to dig into the sector and identify if there's still opportunity in the sector on the long side.
First, let's take a look at the Nifty Auto Index weekly chart on an absolute basis. Prices briefly broke below support at 5,200 in March and quickly reversed, sparking a rally towards resistance near 7,000 where we sit today.
This is a multi-year level of resistance, so we're likely to see some consolidation after a 57% rally off the March lows. For now, 7,000 is the line in the sand. If prices are above that, then Auto's can see further upside towards 9,300, but below 7,000 then there's too much downside risk and opportunity cost in being aggressively long the sector.
We haven't talked much about Real Estate $XLRE lately because there really hasn't been much to say. Over just about any timeframe, it's underperformed the S&P 500 $SPY, which we'll illustrate with a ratio chart below.
Price is basically unchanged over the trailing year. The only sectors that have performed worse are Industrials $XLI, Financials $XLF, and Energy $XLE. This is not a group you want to be associated with.
Looking at the chart, you'll notice it's gone nowhere for much longer than just the past year. XLRE has actually been chopping around in a messy range for the better part of four years now!
This is the third edition of our new "Under The Hood" column. Read more about it here.
We are already getting positive feedback on this new strategy from "Mr. Market" as both of our trade ideas from last week's post are now in the top 5 of this week's most popular stocks (measured by the net increase in ownership, week-over-week).
In other words, Robinhood investors have been buying these names hand-over-fist since we wrote about them last week. They've been rewarded for it too as they've both performed very well.
Workhorse $WKHS has really lived up to its name as it hit our price target in a matter of days, and then went on to double again from there. The stock is up about 4-fold since it broke above our risk level near 5 early last week.
Here is a look at the updated chart, with the same exact annotations from last week's post.
The stocks that worked well in the second quarter should continue to lead the market higher. We still want to be buyers.
On Tuesday afternoon I had a chat with Catherine Murray over at BNN Bloomberg about which stocks we're most focused on. As it turns out, the same stocks and sectors showing up on our buy scans in early to mid-March are the same ones showing the most positive momentum and relative strength now.
It's working. We're sticking with it. Here's the interview in full:
