We've been bearish the Micro/Small/Mid-Caps relative to Large and Mega-Caps from a structural perspective for most of the last year, however, last week's rally confirmed the conditions we look to indicate potential outperformance in the coming weeks and months.
Monthly charts force us to take a step back and identify the direction of the primary trend. By erring in the direction of these trends, we are increasing our probabilities of success. Markets trend. That's why Technical Analysis works. This process at the end of each month is arguably the most valuable part of all the work I do. I can tell you that from the bottom of my heart.
One that definitely stands out here is the Dow Jones Industrial Average going out at new all-time monthly closing highs. This is the highest monthly close in the history of the stock market:
Another interesting one is Gold going out at new 6-year highs:
One question that I get a lot comes from new investors, "Hey JC, I'm starting to get into the market for the first time, any advice?"
For me, I'm convinced you have to get kicked in the stomach, at least once, but likely even more than that, to finally understand the importance of Risk Management. But if you can somehow figure out a way to just take my word for it, and eliminate your emotionally driven decisions completely, I believe it puts you way ahead of 99% of market participants around the world.
If broader markets are going to continue higher, we've got to expect the banks to participate and even lead. If that's the case, we're limiting our risk and betting on one of the bluest of the Blue Chips breaking into blue skies.
The Nifty Metal Index has been dead money for a while, but we are finally starting to see signs of stabilization within the space.
While there aren't a lot of actionable trades right now, we think that rotation into this area is a positive for the broader market and will offer some great setups on the long side in the second half of this year.
For over a decade I've been following the annual Technical Analyst Awards each year when they come out. I get excited when my friends are finalists and even award winners.
I am incredibly proud to announce that Allstarcharts Research is the 2019 Winner for Best Fixed Income Research!
Our work was also chosen as a Finalist in 3 other categories:
We just sent out the Top 10 Charts of The Week Report that goes out to our Institutional Clients every Wednesday morning, and while I may be biased, I really enjoyed putting together week's edition.
We discussed a few market themes as we typically do and then identified several actionable trade ideas on both the weekly and daily timeframes.
With that said, I wanted to share one chart and its caption because I think they sum up the current market environment pretty well.
The technical reasons for remaining bullish US Stocks continue to outnumber the bearish reasons. And there are some stocks already getting started on the next leg higher. Though we are in the bullish camp over here, some elevated caution is necessary.
Today's play is one that takes advantage of a well established trend, yet reduces our cost and has an exit in case an inflection point sending stocks the other way develops.
I was lucky to spend a few weeks in Europe earlier this month meeting with customers, colleagues and old friends. For me it's easy to get up in front of a crowd and talk about the charts that I've been staring at every day for over a decade. I can practically draw them for you at this point. Where I really win is in meeting with investors and traders from completely different cultures both before and after my events. I just got back from a trip to Athens, London, Paris, Amsterdam and Dublin. Between meetings, interviews and presentations, I was able to learn a lot from other investors and gain new perspective on things. That's the point of all this. If we're not going out of our way to learn, then what are we doing?
In this conversation, I sit down with our very own Sean McLaughlin to talk about some of my experiences on the road.
The good news is the S&P 500 and several other large-cap US indexes are back at all-time highs, however, the bad news is there remains a lack of confirmation from breadth and momentum readings around the world.
Needless to say, it was easier to be buying stocks last month than it is today, but let's avoid getting into the weeds and simply look at the number of markets around the world above their 2018 highs.
Below is a table of the global equity markets we track prices in their local currencies. While there are performance stats from several key inflection points like the January 2018 and September highs in the S&P 500, as well as its bottom on December 24th, we want to focus on the left-most "Change From 2018 Highs" column.
This compares the market prices now to where they were at their highest point in 2018, or in other words, it gives us an idea of what the trend is.
Currently, the median stock market in the world is 6.22% off its 2018 high.
There are a lot of interesting charts out there around the world. The current market environment has provided us with a ton of opportunities in multiple asset classes. We've talked about stocks, we discussed commodities, and today I want to focus on the Bond Market. Both Interest Rates and the most liquid exchange traded fund are at critical levels that we need to watch.
