We can highlight as many charts and Altcoins as we like to demonstrate where things could be leaning, but with most things in markets, less is often more.
In this case, it's straightforward.
If 60% of the asset class, namely Bitcoin and Ethereum, can breakout from their current consolidations, the short-term trend is likely up, and it'd be wise to put some risk back onto the table.
Alternatively, if they cannot, and these patterns resolve lower - we should anticipate messier action for longer.
Over the past few days, we've seen the market resolve higher. With the new all-time high in place, we're seeing one sector witness growing strength.
Energy has been a part of the sectors that have been showing strength for some time now. However, there are a few stocks that are now joining the bandwagon of the 'breakout express' and this seems like a good time to jump aboard!
To start off, let's take a look at the Energy index and see what we've got there. Nifty Energy has clocked a new all-time on the Monthly timeframe. Needless to say, that is a big positive! So what are the levels that we're watching? Well, from a slightly longer-term view (we're looking at monthly charts, remember?), if Energy continues to chug on higher, we're looking at a target close to 23,825.
Key takeaway: Sentiment continues to shift away from optimism and toward pessimism, though as with anything it is not a straight line. Speculative activity is flaring up again this week, the trend in trading volumes and call activity suggests less risk appetite on the part of investors. Optimism unwind is happening in the context of elevated longer-term risks, with earnings growth expectations and valuations at elevated levels. A sideways summer that cools optimism and helps relieve valuation pressures could help pave the way for the resumption of a cyclical rally later this year.
Sentiment Report Chart of the Week: Diminishing Highs
Once again this month, I'm going to share info on positions that were closed in the month of May. As a reminder, our exit plans are always laid out ahead of time in each trade idea we publish. In every case, the exits mentioned below were all exited in accordance with the plan as laid out.
To gauge any market trend, we must look under the surface at the components themselves.
This is true for Stocks, Commodities, Bonds, and even Cryptocurrencies. It's Universal.
For instance, when discussing Smart Contract Platforms like Polkadot or Ethereum, we evaluate whether the bulls are diving deep into the projects of the other offerings in the ecosystem.
This is Technical Analysis 101, and it goes back to Charles Dow in the 1800s looking for confirmation of the major averages.
Over 130 years later, in entirely new assets, the same principles govern markets.
In this case, we're looking at Polkadot's first project release and Canary Network, Kusama $KSM.
Similar to how Litecoin is seen as the experimental little brother to Bitcoin, any new additions to be implemented on Polkadot go through Kusama first.
For this reason, the two trade very much in tandem.
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
We put out a post recently about the breadth indicators picking up bullish signals. This was when Nifty 50 was attempting to move past its earlier high of 15,431.
Well, what do we have now? In addition to keeping track of the participation in the general market scenario, it is increasingly important to track the same indicators when new highs are claimed.
Nifty 50 managed to move past its resistance, but what do the breadth indicators say?
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
Key Takeaways: Economic data reflects pinched financial liquidity. US price trends are resilient even with momentum and breadth becoming more challenging. Rest of the world is taking on a leadership position versus the US, with developed Europe in the lead.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The US Dollar remains at crucial inflection points versus both emerging and developed currencies.
In last week’s note, we pointed out the critical 19 level in the WisdomTree Emerging Currency Fund $CEW, along with the numerous tests of support in our custom USD vs. BRICS Currency Index.
Not only is the USD looking increasingly vulnerable against emerging and developed currencies, but we’re now starting to see some of the major Dollar crosses break down or resolve lower.
In many cases, these moves are confirming long-term reversal patterns with USD/CAD. For example, the Dollar just broke to fresh multi-year lows relative to the Canadian Dollar.
We reviewed the chart in this column a few weeks back, highlighting the possibility of an impending double top.
