The market remains a hot mess where we're preferring market-neutral trades, however, some absolute trades are appropriate when the reward/risk is skewed heavily in our favor.

We outlined some favorable longs and shorts earlier today.

Another way of skewing the reward/risk in our favor is by looking for "big bases."

The way we learned it is the bigger the base, the higher in space and this is certainly a big base. And the reason we like looking for base breakouts in this environment is two-fold.

First off, big bases take time to form because they are caused by steady institutional accumulation. Mom and pop investors aren’t the ones creating this type of pattern, so we know that there’s underlying demand that will support prices if they do move lower.

Because prices have memory and the base has taken a significant period of time to build, there’s likely been more trading at each price level...

We remain in an environment where there are stocks going up, stocks going down, and many stocks doing a whole lot of nothing.

We're being very selective before putting money to work and just reiterated a few short setups in the Financial Services Sector.

In this post, we're focused on stocks exhibiting specific conditions that create a reward/risk opportunity that is ridiculously skewed in our favor.

In late April we highlighted the relative weakness in the Nifty Financial Services Index and highlighted several individual stocks that stood out as leaders and laggards.

One of our six charts to watch this week is the Nifty Bank Index, so today we want to look at two stocks showing symptoms of the underlying problem in the sector.

Don't fight the tape. The markets are moving higher, whether we agree with it or not.

That said, we want to be long the strongest stocks. This is trendfollowing 101.

Last week, Steve Strazza put up a bunch of ideas in semiconductors which have been leading the way. Many are now breaking out so we're going to put on an options trade to take a jump into this trend.

Bharti Airtel is in the news this week as its parent company Bharti Telecom decides to sell $1bn in stock to retire debt.

We highlighted Bharti Airtel ahead of its breakout in early May and spoke about the relative strength in Telecom stocks last week.

In this post we're going to outline why the weakness created by this news likely presents a long-term buying opportunity in the stock.

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

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?

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 22, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

This week’s main theme is risk-on action from beaten-down areas which we'll highlight in our US Index and Factor ETF tables, below.

We're putting a lot of emphasis on risk-appetite measures right now in order to provide insight into how the recent rangebound activity in Equity and Bond markets is likely to resolve itself.

The most basic way to assess risk-tolerance is to compare the performance of risk-on vs risk-off assets. As such, this post will focus on how the offensive vs defensive areas of various markets are acting right now.

Click table to enlarge view.

This week we saw some more mean-reversion in the laggards in our US Index ETF table. The most risk-on areas such as Transports (DJT) and the Mid/Small/Micro-Cap segments have been long-term underperformers, yet...

We've been using our "Five Bull Market Barometers" to measure the long-term health of the market and remain in the camp that risk in Equities remains elevated.

In this post, we're going to outline several charts we think will set the tone for the broader market through the rest of the quarter.

First, and most importantly, is the Nifty Bank Index which made new relative lows this week. On an absolute basis, prices are nearing their March lows of 16,100 after failing to reclaim their 2015-2016 highs in April.

Click on chart to enlarge view. 

What we're watching is how prices react to those March lows. Is there any meaningful demand at that level? or does the trap door open and we see a quick move towards 13,500?

A lot of longs are using those lows as a stop or point of reference for their positions...not just in the Nifty Bank Index, but in most indices/stocks that bottomed around the same time. And if the largest sector of...

Why does Technical Analysis work? Because markets trend. No one can argue that. I don't care who you are. And what do we do as technicians? We look for trends!

I was recently a guest on the Trends With Benefits show. It's the perfect name for a podcast about the stock market, especially when you invite someone like myself, who is constantly looking to benefit from underlying trends in the market.

In this conversation, we talk about our Top/Down approach to the stock market. Ed asks me about why we were selling stocks and buying bonds weeks before the stock market crashed. So I tried to explain the things we saw, both from a breadth deterioration standpoint and all the intermarket relationships that had been pointing to...

From the desk of Steve Strazza @Sstrazza

Lots of charts are being shared showing the exponential growth in trading activity, new accounts, and anything else that might paint a story of euphoria at retail and discount brokerages since the pandemic broke out.

Here is some personal background only to provide context for what I’m about to discuss.

I live on an island. It is tiny, about 4 square miles. In fact, I live on an obscure island just above Key West which is technically much smaller than that. As a “Census Designated Place” it’s really just a collection of roads and canals, a village of about 4,400 people.

It’s nice, but it comes at the cost of an economy that relies almost entirely on Tourism. The people who live here are more or less fishermen or workers at the many hotels, bars, and restaurants in what’s generally a booming downtown area. Since shutting down our borders months ago, the local unemployment rate has spiked to an estimated 50%.

Earlier this month we outlined the "Five Bull Market Barometers" we're watching to identify the beginning of a new bull market in stocks.

In this post, we'll update those charts without going into as much detail as to why they're important. So if you haven't read our initial post linked above, we'd encourage you to check it out.

With that said, let's jump in and see how these charts have developed since.

From the desk of Steve Strazza @Sstrazza

Yesterday, we wrote about the divergence in both structural and tactical trends between Dow Transports and Semiconductors. The bottom line is that Dow Transports (DJT), which is the traditional "Dow Theory" average, has been getting smoked relative to the "New Dow Theory" average, the Semiconductor Index (SOX).

While we don't know whether or not this can persist indefinitely or if these divergences will soon resolve themselves, we do know that Semiconductors remain one of the secular leaders and are thus an area we want to continue to bet on from the long side.

In this post, we'll outline some Trade Ideas in our favorite Semiconductor names.

Something all of these setups have in common is that they are exhibiting impressive relative strength vs the broader market. They also all resolved to fresh highs recently, which gives us a well-defined risk management level to trade against.

We have included...