This entire year we've been talking about under-performance in the mid-cap and small-cap segments of the market. To take advantage of that we've wanted to be shorting, or at least avoiding longs in, the weakest names in sectors like Public Sector Banks, Infrastructure, Metals, Media, Realty, etc. Last month many of our downside price targets were hit from a tactical perspective and we took a more neutral approach, waiting for better entries on the short side. Now that we've seen a multi-week bounce off the lows in the mid and small-cap indexes, we're going to revisit the space for the best reward/risk setups on the short side.

From the desk of Tom Bruni @BruniCharting

There's been a lot of talk about equity market breadth both in the US and globally, but one thing I've not seen mentioned throughout the debate is Dow Theory. While there are five tenets of Dow Theory, today I want to focus on the aspect regarding confirmation among the three averages: The Dow Jones Industrial Average, The Dow Jones Transportation Average, and The Dow Jones Utility Average, by assessing their primary trends.

Sponsored by Investor’s Business Daily - Todd Sohn does amazing work on a daily basis. We're constantly communicating and sharing ideas with one another. I can tell you for a fact, there are few people in this world who look through as many charts as Todd. Our process is similar so I have really been looking forward to this conversation. We covered a lot of topics in this episode including U.S. Stocks and the sector rotation we've been seeing underneath the surface. Sentiment is a big part of their work over at Strategas and I find it really interesting how he incorporates analyst ratings to find ideas in the market. This is a good one!

I love this game. It's us against the world to try and make a buck in this market. Every day brings new opportunities and story lines. The hard part is distinguishing between what matters and what is just noise. We're hard wired to need to gossip and tell stories. It's who we are going back to the cognitive revolution 70,000 years ago. In fact, it would be unnatural for us not to participate.

Many of us get our gossip from the market. That's one reason why we all get along and share ideas with one another throughout the trading day. I see some women, for example, watching Bravo and the gossip shows on E and stuff like that. We all get our gossip in different ways. While there seems be little harm done by watching the kardashians or vanderpumps, by following some narratives in the stock market, there is actually a lot of money at risk. So for those of us who get our gossip fix from market story lines, it's especially hard to differentiate reality from fairy tales. 

From the desk of Tom Bruni @BruniCharting

Sector rotation in this market continues and the Agribusiness and Chemical Industries within the Materials Sector look to be heating up. While their performance on a relative basis is lackluster, on an absolute basis there are several setups offering reward/risk scenarios skewed in our favor.

First let's take a structural look at the Agribusiness ETF $MOO, which contains exposure to Chemical stocks as there is no ETF dedicated to that industry. Prices got back to their '08 highs earlier in the year and have been consolidating since. A breakout above 66 would signal the beginning of a new long-term uptrend that targets 94.25.

Click on chart to enlarge view.

From a tactical perspective prices are back toward the top of an ascending triangle continuation pattern. If prices can break above 64.70 we'll likely see a move up toward the 161.8% extension of the '15-'16 decline near 68.75.

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From the desk of Tom Bruni @BruniCharting

Earlier this year I discussed what I look for when picking a bottom in a stock using Twitter as an example. Today I want to look at The Container Store because it's exhibiting similar characteristics that suggest the stock has begun a new long-term uptrend.

We're witnessing yet another breakout attempt in the commodities market, and this time it's Cotton. This post is going to take a look at the setup, how it may develop, and how we can take advantage of it.

From the desk of Tom Bruni @BruniCharting

Every so often we hear the narrative that under-performance from China's stock market is a canary in the coal mine for US Equities, and the recent tariff tantrums have brought this discussion front and center. Today I want to look at this relationship to see if it has any merit or if it's just a smart sounding soundbite that you can use around the office water cooler.

I won't pretend to know anything about medical devices, how they're built, or why they work. But that doesn't mean we can't profit in the sector.

The Medical Devices sector as a whole is trading at all time highs, and one particular name is setting up a screaming buy opportunity.

From the desk of Tom Bruni @BruniCharting

We've been extremely vocal about the Medical Devices space on the blog, and rightfully so, with the sector continuing its long-term trend of out-performance throughout 2018. The index has 57 components, but because the top 10 stocks make up roughly 60% of the index, opportunities in the smaller components tend to be overlooked by many market participants. In this post I want to look at all of its components and highlight names where our risk is well-defined and the reward/risk is still skewed in our favor.

Let's start off with the sector ETF $IHI on an absolute basis for context. Prices are just off all-time highs after successfully retesting their breakout area near 203.50. As long as prices are above that level, short and intermediate-term momentum remains intact and our next upside objective is up near 248-249.50.

Click on chart to enlarge view.

On a relative basis, the sector continues to digest its strong year-to-date gains and work off a bearish momentum divergence by...

Most Nifty Indexes' largest components have a very large weighting on their performance, and Nifty Pharma is no exception. Sun Pharmaceuticals represents roughly a quarter of the index, so today we're going to look at it's role as a potential leading indicator for the rest of the sector.

Below is a daily line chart of the Nifty Pharma Index overlayed with Sun Pharmaceuticals. What we see from this relationship is that Sun Pharma generally leads the index, so when it's showing relative strength a move higher is likely, and when it's showing relative weakness then a move lower is likely. The two rarely separate from each other for long.

Why this is relevant to us now is because in May when the index undercut its August 2017 lows, Sun Pharmaceuticals actually held those lows and has been showing relative strength ever since. With history as our guide, this suggests that we may want to be looking for a move to the upside in both Sun Pharmaceuticals and the sector as a whole.

For some additional context, here is a daily chart of Sun...