With all the noise surrounding U.S. elections this month, we have seen very little coverage about the recent surge in base metal prices. Sure, everyone is talking about gold hitting a monthly high, but don’t let the shiny metal blind you to what is happening with such base metals as aluminum, nickel and tin. You don’t have to travel too far back in history to see what has happened to U.S. stocks when those base metals start making some noise.
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November's Strategy Session will be held on Wednesday, November 3rd 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.
You guys know that I consider the S&P500 to be just one index in just one country in just one asset class in the entire world. There is a lot more out there. And while this might be true, I would also argue that this one index is one of the more important ones that we need to be watching. It is a good representation of U.S. Stocks, since the Dow Jones Industrial Average is just 30 names, the Nasdaq is tech-heavy and the NYSE Composite has a lot of international exposure. One can argue that the Russell3000 is the best representation of the U.S. since it represents over 98% of all investable assets in U.S. equities, but there is no liquid asset to gain exposure to it.
So today we are breaking down the S&P500, setting price targets and defining our risk management levels:
It's important to recognize what type of environment we're in for the market. During different times of the year, traders and investors tend to behave in certain ways. When you smooth out the data over many years, their patterns become clear. We all hear about, "Sell in May and Go Away", but what about, "Remember to Buy In November"?
Today we're focusing in on the end of what is historically the worst seasonal period of the year for the Dow Jones Industrial Average. So what happens next?
Every month I host a conference call for All Star Charts 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 have been bullish towards both U.S. and International stocks since early July and are seeing money rotate into new sectors and countries showing leadership. We will be discussing this in detail on Tuesday.
We will also be focusing particular attention to the recent sell-off in precious metals and rally in US Interest Rates.
This month's Conference Call will be held on Tuesday October 18, 2016 at 7PM ET. Here are the Registration Details:
With volatility spike in British Pounds, the more interesting story to me is how stocks are pushing up against the former all-time highs in 1999. Since that historic era in the stock market, British stocks have continuously attempted, and then failed to break through and finally make a new all-time high. The London FTSE 100 has been trying to stay above that historic market peak for almost 17 years.
Here is a chart of the London FTSE 100 going back to the late 1990s. The more times that a level is tested the higher the likelihood that it breaks. The reason is that there comes a point where anyone willing to sell at those levels will have already sold, ultimately leaving fewer sellers than buyers. This is when you get a "breakout":
This week high beta stocks are hitting fresh year-to-date highs relative to stocks with low volatility. This is a new trend, as lower volatility stocks did better than their higher beta counterparts in both 2014 and 2015. But this year has been a completely different story and it does not appear to be stopping.
Here you can see that while the S&P 500 was putting in new highs into May of last year, the ratio between high beta stocks and low volatility stocks had already peaked and was putting in a lower high. We are using the Powershares S&P 500 High Beta ETF $SPHB and the Powershares S&P 500 Low Volatility ETF $SPLV for the chart below.
The headline writers do their best to make you think that Gold is a US Dollar story. But in the real world, the one we're all forced to live in, Gold is a Gold story. It really has nothing to do with the US Dollar, and if you price gold in the other currencies, you'll see that very quickly. While gold might be struggling when priced in US Dollars, if you look at it priced in a weaker currency, say emerging markets, you'll see a completely different picture.
Today we are looking at Gold priced in an equal-weight basket of Emerging Market Currencies, specifically the BRICS:
Have you guys noticed that the prices of Gold and Silver have gone nowhere for 3 months? There's a reason why we've wanted to stay out of this market since early July and let them digest their impressive gains since the January lows. Knowing when to stay out of a market is just as important as knowing when to be in it. Opportunity cost should also be considered in the risk calculation.
Today we are taking a deep dive into Gold and we're going to look at things from all angles, all currencies and all time frames.
