From the desk of Tom Bruni @BruniCharting

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The semiconductor index has likely caused both longs and shorts a bit of angst over the past several weeks as it failed to make any directional progress near the top of its 10-month range of 560 to 680. Analyzed on its own the index is providing little conviction for the bulls or the bears, but a look at the individual components may provide some clues regarding the next directional move in semiconductors as a group.

The daily chart provides a tactical look at the 560-680 range that prices have been trading in for roughly 10 months now. Whether this range will resolve to the upside or downside is unclear, but the presence of a flat 200 day moving average, a bearish momentum divergence, and prices consolidating in the direction of the underlying trend may all be early warning signs of a move lower in the short-term.

With the deterioration in market breadth throughout the entire month of April and bearish momentum divergences showing up in some of the most important stocks, sectors and countries in the world, I think some exposure on the short side here is warranted.

Today we're going over my favorite short of all the Dow 30 Components.

The only thing that pays us in this market is price. That's it. So what we try and do is use a handful of supplemental indicators to help us identify when a change in trend is about to occur. One of the more helpful tools we have to achieve this is momentum. We start to see momentum readings diverge from price, before price ultimately peaks in the coming days, weeks, or months; depending on the timeframe in question.

I personally choose a 14-period relative strength index (RSI) to gauge momentum across asset classes. You can read more about how I use RSI here. In this particular case, I want to focus on the obnoxious amount of bearish momentum divergences that we're seeing in many of the most important indexes, sectors and stocks around the world. These "divergences" occur when prices make new highs, but momentum simultaneously makes a lower high. It's a sign that a change in trend is approaching. Since we take a weight-of-the-evidence approach to markets, it's not just that we're seeing one or two of these sprinkled around. They're showing up all over the place.

From the desk of Tom Bruni @BruniCharting

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Throughout 2016 the weight of the evidence has been building in favor of broad-based commodity strength and now Silver is joining the party with a massive structural breakout on both an absolute and relative basis.

Structurally Silver has been in a downtrend since 2011, but met our downside price targets near 14 over a year ago and has since been building a rounding bottom. Last week, prices broke and closed above the downtrend line from the 2011 highs to confirm the bullish momentum divergence and are following through to the upside this week.

We had a nice run in the U.S. stock market throughout February and March. We obviously couldn't be happier to have seen that as we turned bullish just as the rally was getting started. However, this month, while most of the major U.S. Indexes made new highs, the breadth has weakened. We are seeing fewer and fewer stocks and sectors participating and I think the deterioration in breadth is the beginning of more broad selling to come.

Today there is one stock I think we need to mention as an aggressive shorting opportunity:

From the desk of Tom Bruni @BruniCharting

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Yen strength across many of its crosses has been a structural theme for the better half of the past year, but today a few of these pairs look to be setting up for some mean reversion over the short-term.

Pound / Yen remains in a downtrend below its downward sloping 200 day and made new lows in April, but momentum diverged positively. Today prices closed back above the February lows to confirm the bullish divergence and failed breakdown. This suggests we want to be long if prices remain above the February lows on a daily closing basis and add to our positions if prices close above the downtrend line from the February highs.

This week I had the opportunity to come on Jonathan Davis' Booms and Busts show in the United Kingdom. Jonathan is a long time subscriber of my research, so he understands my approach to the marketplace as well as anyone.

In this interview we discuss the importance of studying supply and demand dynamics. He asked me why I don't care about what the Federal Reserve thinks, why I ignore fundamentals and economics as much as I can, and why I don't listen to the financial media. I try and do everything in my power to avoid that noise. We're focused on the behavior of supply and demand simply because our goal is not to sell ads or increase page views. Our only goal is to try to make money in the market. There is a big difference between the two business models and it's important for traders and investors to recognize it.

When the major U.S. Stock market indexes are making new highs, you want to see the list of stocks making new highs increasing along the way as well. This had certainly been the case throughout February and March, but has come to a complete halt this month. Looking across the board, the S&P500, Dow Jones Industrial Average, Nasdaq 100, Russell 2000, Mid-cap 400, etc have all made new recovery highs over the past couple of weeks, since our epic bottom in late January/early February. The problem is that 1) all of our upside targets have now been achieved where we wanted to take profits and 2) breadth in the market now stinks.

Utilities have been the monster in the U.S. Stock Market this year. While some sectors, like in the metals or energy space, have bounced back from horrific downtrends, others have kind of just muddled around, like Financials for example. Utilities, on the other hand, have been an absolute beast. They've been rallying since the beginning of the year and this month hit new all-time highs. Moving forward, I think the risk vs reward in this sector favors the bears.

Here is a chart of the S&P Utilities Sector Index rallying this year to get back up towards its early 2015 highs. Meanwhile, at the new all-time highs this month, momentum, as defined by a 14-week relative strength index, put in a lower high. This bearish divergence and failure to hold on to those all-time highs should be the catalyst to send share prices in utilities tumbling in the coming months:

I think a really important concept that too often gets overlooked is the power of keeping an open mind. Why must we stick to a bearish or bullish stance? What is wrong with neutral sometimes? Just because our upside get hit, does that mean we need to flip bearish and start shorting everything? I don't think so. I much prefer taking profits when objectives get achieved and then reevaluating once we get more price data. We don't know what is going to happen tomorrow or next week or next month. No one does. So let's appreciate the fact that the future is unknown and therefore all possibilities should be considered.

Today's Chart of the Week represents what I consider to be part of the bullish case for the S&P500 in 2016. I'm not ready to pound the table bullish, or bearish for that matter, but if this one plays out the way it looks, I would argue that it's a giant feather in the hat for the bulls. This is the mystery chart that I tweeted out yesterday, for those of you who have been asking.