We look to Financials as a leader. We've never had a bull market in US Stocks without participation from the banks. They don't necessarily need to be leading but they do need to participate. When we see the S&P Financials Index going out at new 10-year weekly closing highs, it's hard to be bearish stocks as an asset class. This has been a big part of the aggressively bullish case I've been making since the summer of 2016. Meanwhile, the Broker Dealers Index is holding above its former all-time highs from 2007 and just beginning a new leg higher.
These are not bearish characteristics for stocks as an asset class.
Every month I host a conference call for All Star Charts Premium Members where we discuss ongoing themes throughout the global marketplace as well as changes in trends where new positions would be most appropriate. This includes U.S. Stocks & Sectors, International Stock Indexes, Commodities, Currencies and Interest Rate Markets.
We've been bullish towards US and Global Stocks as they remain in strong uptrends on any sort of intermediate-term time horizon. I still think this is an environment where we need to be buying weakness in stocks, not selling strength. The weight of the evidence is still pointing to an increased amount of risk appetite, not risk aversion. We will go over a multi-timeframe approach on this conference call where we will start with the longer-term and then work our way down to more short-term to intermediate-term investing ideas. This will also include other assets like the US Dollar, Euro, Gold, Silver, Crude Oil and Interest Rates.
There is a lot to be said for taking the time to analyze all of the stocks in an index. I find that process to be much more rewarding than obsessing over every 50 basis point move in the index itself. I've written in the past about how I think the Dow Jones Industrial Average is underrated. You can go through all 500 stocks in the S&P500 or just 30 of them in the DJIA and you'll get a quick snapshot of the health of the market. If there are more good ones than bad ones, it's probably not a downtrend in the index. If there are more bad stocks than good ones, it's likely the index will follow them lower as well.
Sector rotation is the lifeblood of every bull market. When one sector reaches a temporary peak, another one takes over the charge while the former leaders consolidate. We have seen this happen throughout the past 2 years in a very consistent way. Today we're taking a look at all of the individual sectors and the industry groups within them to find the areas of strength and weakness moving forward.
The best hour I spend each month is going over my Monthly Candlestick Charts. I can't understand how some people don't do it. Think about it: 12 hours of your life per year. Imagine all the things you do throughout the year that takes you 12 hours and probably does you more harm than good.
If you forget everything I ever tell you, please just remember not to ignore the monthly candlesticks. It doesn't matter if you're a short-term trader or longer-term investor or anything in between. Getting longer-term perspective and identifying the direction of the primary trend is the most important thing we do. Once that has been determined, then we can incorporate multiple timeframes to break it down to our time horizon of choice, whether it's more intermediate or short-term.
Since November is now in the books, it's that time of the month to rip through a ton of Monthly Candlestick charts. Here's what I'm seeing out there:
I get asked a lot about moving averages. Many people think they are this incredible indicator that will lead to riches. Unfortunately, they're the furthest thing from that. These are just invisible lines that people like to paint different colors to exaggerate their meaning. There are all different kinds of moving averages: some are shorter-term, some are longer-term, some give more weight to recent prices while others are equally weighted. I like to say that if you have enough moving averages on your screen, one of them will work!
Today I'd like to share with you in simple terms how I use them:
Register here for our live monthly conference call for Premium Members of All Star Charts India.
December's Strategy Session will be held on Thursday, December 2nd at 7 PM IST. As always, if you cannot make the call live, the video and slides will be archived and published here along with all of our past conference calls.
I look at a lot of charts. The best way to visualize the changes in equilibrium between supply and demand just so happens to be in chart form. If there was a better way to do it I would use that instead. So I'm stuck ripping through thousands and thousands of charts a week. I'm cool with it. It's something I enjoy doing because I know that the only way to properly weigh all of the evidence is to actually weigh it all.
One of the most valuable things I do is to go through every single U.S. Market Index. It really helps get perspective from all sorts of different angles, whether it is various market caps or weighting combinations. I've learned that it's not just about the S&P500 or Nasdaq100 or Dow Jones Industrial Average. It's how they are all getting along with one another that I'm most concerned with.
We'll go one by one discussing risk levels, targets and implications:
It was Thanksgiving last week and the hot topic all over dinner tables throughout the world was about Bitcoin. Older relatives asking younger nieces and nephews to explain crypto-currencies was probably something pretty hilarious to watch by being a fly on the wall of many households.
In the spirit of the holidays, I thought I would post a couple of charts that I think are worth sharing with those family members and friends who are coming out of the woodwork asking about the not so new asset class. While I don't particularly care about the actual technology behind blockchain, I do think it's important to focus on the behavior of these markets. This is how we can responsibly calculate risk vs reward propositions. That's what this is about at the end of the day right? We're here to make money.
