You guys know that I prefer to incorporate more of a weight-of-the-evidence approach to markets rather than basing my decision making on a single indicator. We look at stock markets all over the world to find themes, both bullish and bearish, and then take advantage of them within U.S. markets. I then take a similar approach and go sector by sector in the U.S., including a series of sub-sectors, to break it down even further and find themes within the U.S. As you guys well know, the reason we were bullish since January was because of the weight-of-the-evidence internationally, not because of what we saw in the S&P500 or Dow Jones Industrial Average.

Today I conducted an experiment where I went sector by sector doing my normal annotations and note-taking, but this time I asked myself 3 questions for each sector/sub-sector:

Changes in trend rarely get cleaner and as well-defined as the distribution taking place in the semiconductor space. The infamous head and shoulders topping pattern is as clear as day in this one. Today we're looking at the Philadelphia Semiconductor Index, which is the benchmark for semiconductors. This basket of chip stocks appears to be near a completion of a massive multi-year distribution pattern.

This is a weekly chart of semi's putting in their highs last summer to begin the right side of this topping pattern. This one fits the description

With all of the bad news and negative sentiment surrounding the high yield bond market, I think this is a place where we want to be buyers, and no longer sellers. High yield bonds are just a fancy way to refer to "Junk bonds". At the end of the day, high yield is just that: high yield, because you're getting paid a higher return for the risk you're taking by owning junk. Both on their own and relative to the safe-haven U.S. Treasury Bonds, these things have been destroyed over the last few years.

Moving forward

How often do we hear one person ask another, “So what are the charts telling you?”, or “What does that chart say?”. Think about that. Charts don’t actually say anything at all. They’re charts. Charts don’t speak. So why do so many people want to know what the charts are saying?

Technical analysis is the study of the behavior of the market and market participants. The most important tool that we have as technicians is price. Movements in the price of an asset represent the changes in equilibrium between supply and demand. It just so happens that the best way to visualize these changes in equilibrium is in chart form. This is why many technicians prefer to be chartists. It is not necessary for a technician to use a chart

This week I was running up and down the east coast in meetings and conferences. With some of the free time I had left, I sat down with a few of my favorite financial journalists to rap about the markets. On Monday afternoon I was on Bloomberg TV and Tuesday I was on the Business News Network with Frances Horodelski. I don't have as much time to do TV like I used to in the past, so it was a fun experience for sure.

Here is the BNN interview in full:

On Monday afternoon I was over at the Bloomberg headquarters in New York City to discuss markets with Joe Weisenthal, Alix Steel and Scarlet Fu. Every time I've been on a guest on this show I've had pretty much nothing but bad news to share as far as the stock market is concerned. In January, all of our downside objectives were achieved and I've really changed my tune. I think this strength we've seen in stocks over the past month continues, particularly the relative strength in emerging markets.

Here is the video in full:

From the desk of Thomas Bruni @BruniCharting

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After rallying more than 13% over the past three months, EUR/GBP looks to be setting up on the short side.

Structurally this market has been in a downtrend since 2009, with selling accelerating further in late 2014 as support near .7750 failed to hold. After consolidating above .6930-.70 throughout the majority of 2015, prices moved to new highs and rallied back into broken support.

You guys who know me already understand why it is that I am constantly looking for whipsaws. The best risk vs reward opportunities are sparked from such events. We often refer to whipsaws as failed breakdowns or failed breakouts depending on the direction of the underlying trend. From failed moves come fast moves in the opposite direction, and that's why we look for them.

The idea behind support and resistance is that when markets meets resistance, or a level where supply exceeds demand, prices continue to fall from that price until eventually it breaks through it. Sometimes it tests resistance once or twice and sometimes 3 - 4 times, but the idea behind it remains the same. Once resistance has been broken

From the desk of Thomas Bruni @BruniCharting

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With Cotton futures nearly 75% off their 2011 highs, market participants may be looking for a reason to get long this market. The weight of evidence however, suggests there is likely another 15% downside ahead.

The daily chart spanning back nine years shows prices topping and subsequently beginning a downtrend in early 2011. Over the past eighteen months prices have consolidated as they attempted to break back above the 2012 lows and downtrend line from the 2011 highs. Despite its efforts, Cotton could not close back above the confluence of resistance at 68 and is now threatening to break through the lower end of the 57-68 range.

From a structural perspective the next logical area

[hide_from accesslevel="premium"]In this week's members-only letter we discuss the following topics:

• Why Emerging Markets Are Outperforming U.S. Stocks
• Did you Listen and Take Profits In Treasury Bonds Last Week?
• How To Make Money In Apple, Twitter, Yahoo and GoPro
• Which Developed Markets Should We Buy: Europe or Japan?
• Is It Time To Own China? Why?
• Which Stocks Will Lead the U.S. Stock Market Higher?