Warning signals were piling up throughout 2020, but weak breadth has been an underlying issue for Indian stocks since they made new highs in August 2016.
While we wait for breadth and momentum divergences to form and suggest getting aggressive on the long side, we're going to look back at how the average Nifty 500 stock has performed over the last 3.5 years and why this data is relevant to today's market.
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?
We are not seeing any evidence of a bottom for stocks, yet. In these sorts of scenarios we want to see improvements in market breadth and/or bullish momentum divergences start to pile up. We're not seeing any of either.
In times like this, where many stocks, indexes and sectors, are in what we call "no-man's land", it helps to find non-correlated assets to analyze and perhaps invest in.
One thing that does NOT move up and down with the US Stock Market is Natural Gas. Evidence of this lack of correlation can be seen throughout 2019, for example, as Natty Gas got crushed while US Stocks soared.
I'll start by saying: this is no ordinary week. But you knew that.
If you are sitting on the sidelines, waiting for all this craziness to subside, that is not a bad idea at all. There is no reason to put our money at risk if we can't get a handle on our own emotions during this highly uncertain time.
That said, for those who are willing to wade into these choppy waters with me -- these insane premiums offer us the ability to sell premium FAR away from current prices. I'll share with you my simple game plan for this week.
Every month I host a Conference Call for members of All Star Charts Pro. From the feedback we get from our readers all over the world, this one feature of our Membership is a fan favorite.
A lot has happened in the past month. You hear things about interest rates getting slashed to zero, viruses impacting stocks all over the world and many things that none of us could have predicted a month ago. However, Technical Analysis gave us the ability to get out of the way and avoid this entire mess. Not only did we want to buy bonds, but we simultaneously wanted to sell stocks!
Today I want to share with you the video of last month's Live Conference Call. I've unlocked it so anyone can watch it, not just Premium Members. I've gotten a lot of requests to do this, even from paid subscribers, because opening it up serves as a great educational resource for the future. We can all learn from this, myself included.
These are the types of markets that are a statisticians dream come true. They get to run all sorts of scans and tests to see how long it's been since volatility did this or the rate of change in the S&P500 did that. To be honest, it's all a bunch of bullshit. The market doesn't care about your stats.
I'm not going to go over all of them because I don't find them very helpful. In fact, I find them incredibly deceiving and, even worse, distracting. I felt that way on the way up with their stupid, "S&P500 hasn't moved 1% in a single day in x amount of days....". Who gives a damn?
Today is no different.
Let's talk about what actually matters.
2750 in the S&P500 was support in the first half of 2019. We closed the week still below that. We might have a slight bullish momentum divergence, but if S&Ps are below 2750, we put this index in the "No-man's land" category:
