Everything in life is relative. In markets, it works the same way.
"How could someone possibly want to own these bonds that pay negative yields"?
Well, what's the alternative? Crashing stocks? Collapsing energy commodities? It's all relative.
In my experience, when assets are in strong uptrends, some might call those "bull markets", they don't just do well on an absolute basis, but they also tend to outperform their alternatives. In the case of stocks, you have Bonds and Gold that are two other very popular places to allocate capital.
The Chart of the Week has to be the Nasdaq 100 breaking out of a multi-year base relative to US Treasury Bonds (Blue Line). I also included the Nasdaq relative to Gold, which has yet to complete this basing period (Black Line):
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
The Top/Down approach to markets is at the core of what we do at All Star Charts. That means starting at the asset class level and peeling back each layer to refine our view of the smaller components that make up that asset class. With each new layer, we discover information that helps us form our weight of the evidence conclusion.
That brings us to our new weekly column, The Top/Down Take, where we hope to educate readers on how we execute this process and highlight its value through the analysis of popular stocks.
We retired our "Five Bull Market Barometers" in mid-July to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we're watching in order to profit in the current market environment.
This week, we're going to highlight the continued outperformance from offensive assets as well as the weakness we're starting to see from many defensive assets. This kind of action continues to suggest increasing risk-appetite and is supportive of higher prices within Equity and Commodity Markets.
Welcome to the third edition of “Louis’ Look,” where I walk through the lessons I’ve learned over the past week through interning at All Star Charts. You can read the previous post here.
In this post, I want to step back from the market and focus on people. I really enjoyed writing this one, so buckle in.
As the U.S. continues to deal with the Coronavirus situation, it makes sense that stocks in the healthcare space should be doing well. There's a lot of attention and investment happening here to help deal with the calamity and prevent future spread.
Of course, as traders we don't need to read the headlines to know this. Following price and charts tells us everything we need to know.
One of our favorite names in the space is setting up nicely and it's time for us to get involved.
The words "Support" and "Resistance" get thrown around a lot. In most cases, it's stated as fact, "This level is resistance", or "There is support at that price". What is important to remember, however, is that these are only "Potential levels" of support and resistance. We may have evidence suggesting there could be overhead supply near a certain price, but we won't know for sure until after the fact.
Today I want to talk about how many Indexes in the U.S. are approaching "Potential" Resistance.
Let's take a step back and define what that actually means. Resistance is when there is an overwhelming amount of selling pressure vs buying pressure. There are more sellers, than buyers (or as the smart ass in the corner will mention, it could be one giant seller and not necessarily more of them, but I digress). Bottom line is, that Resistance is the price where there is more supply for an asset than there is demand for it.
The first obvious one is the S&P500 getting back to its February highs:
Healthcare stocks are breaking out to their highest levels in history. This isn't something where we're waiting for them to recover. We're betting that this is actually just the beginning. Healthcare stocks are going a lot higher if the S&P500 is going to 4000. That's the bet we're making.
Here is the Healthcare Index Fund $XLV closing at back-to-back all-time highs the past 2 weeks. I think there's another 14% if upside from here:
This week on the show, Howard and I talk about the winners and losers of the post Covid world. We spend a lot of time focused on the companies doing great things and building cool tools, but who are the ones getting left behind? Which ones are the shorts?
Welcome to this week's edition of "Under The Hood." You can read more about the column here.
What we do is analyze the most popular Robinhood stocks over the trailing week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We have some new additions coming for how we generate the list of most popular names, which we'll explain more each week as we add new data sets. This is a really exciting time for us. There are so many new data sources popping up so it's really just our responsibility to organize it to where it only tells us exactly what we want: An unusual increased level of interest for an asset.
