Thanks to everyone for participating in this week's Mystery Chart. It was a bit of a layup, as most of you were bullish, recognizing the powerful failed breakdown and follow-through back above critical former support.
We would agree and like this chart for a counter-trend move right now as well. But the reason we chose it was really for informational purposes, as we are seeing continuation patterns resolve higher all over the globe right now.
The more of these patterns that resolve to the upside, the stronger the weight of the evidence builds in favor of other consolidations working themselves out higher as well. We are seeing this across all areas of Domestic and International Equity Markets, many of which we'll highlight in this post.
US Stocks remain the strongest game in town, with the Nasdaq 100 closing pennies from all-time highs today.
On the back of that, I wrote a post for US Subscribers outlining what the "safe haven" assets of Yen, Treasury Bonds, and Gold are doing and what it means for stocks as an asset class.
Given that US market action tends to set the tone for the rest of the world, I think it's a good read for Indian market participants as well.
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?
Consolidations tend to resolve in the direction of the underlying trend. But when they don't, that's the signal!
An oldie but goodie from the past, that I always think about when this comes up, is the US Treasury Bond Fund back in the Fall of 2016. I remember chatting with Liz Claman at the time about it on FOX. The $TLT was consolidating in a classic, textbook continuation pattern above former resistance from the early 2015 highs:
The bet we were making (for many other factors as well at that time) was that this was not a continuation pattern, and instead a massive failed breakout.
Last week, the guys published a bullish piece on Chinese internet stocks. Since then, a bunch of them have already taken off and I don't feel like chasing here. However, one name that wasn't mentioned is setting up for a potential "catch up" trade and the time feels right to jump in.
Looking at Monthly Charts only takes about an hour per month and is one of the most valuable exercises in our process. By focusing on the long-term, we can filter out the noise and identify what's really happening with a stock, index, etc.
In this post, we wanted to share a few charts that stood out to in May.
Today I want to talk about how important it is to know what's inside the index funds you own. In many cases they can be misleading. Something like the Dollar Index, for example, which is basically 60% Euro, is not exactly the best barometer of the "U.S. Dollar". The Consumer Discretionary Index is 23% Amazon. Stocks like Google and Facebook aren't even in the Technology Index! Combined, $GOOG & $FB actually make up around 40% of the Communications Index.
It's important to know what you own, or what you're analyzing for that matter. When you talk about the S&P500, this is basically they greatest momentum strategy of all time. It buys more of the biggest and best performing stocks and kicks out the worst ones, replacing them with better performers. For me, this is the best large-cap momentum strategy ever created.
As June gets under way, it’s time to review positions with June options that remain open (haven’t already hit profit targets or been stopped out).
Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.
Over the past few days, we've had traders and investors from all over the world go through our new Charting School. In case you missed it, I partnered up with a group of Emmy-award winning producers to put together what I think is the best course on Technical Analysis ever created!
I can say that with a straight face because these 6 hours of content are filled with lessons that I've had to learn the hard way over the past 2 decades, plus all of the knowledge I've picked up from the best Technical Analysts in the world, either in real life over the years or on my podcast that now has over 100 interviews.
We've had a lot of feedback so far from people taking the course. The one common denominator between all of them is, "It's Practical".
