Excuse my play on words in the title, but I wanted to make the point that at 13% of the Nifty 500, the Fast Moving Consumer Goods Index is a big part of the bull case for Indian stocks.
We've talked about weak participation in this sector and since then it's deteriorated further as opposed to getting better.
While we wait to see whether or not this retest of all-time highs is a successful one, we want to define our risk on the long side in individual names that continue to lead the market higher.
One subsector that remains a consistent source of these setups is Software.
Below is a chart of Software relative to the Technology Sector overall, finding support right where it needed to at our previous price target. Whether prices can get back to their year-to-date highs will be an important tell, but for now the uptrend in this ratio remains strongly intact.
Interest Rates in the United States hit new 52-week lows last month. But from the looks of it, the commodities market and stock market are not in agreement with that direction. It's when we see divergences among asset classes that it gets my attention.
Today we're looking at the divergences between stocks, bonds and commodities that I believe are pointing to higher rates this quarter. If we're going to take the weight-of-the-evidence approach, it's 2 to 1 in favor of rising interest rates.
A Doctor would never diagnose a patient without first seeing what's going on inside. A mechanic won't be able to tell you what's wrong with your car without lifting the hood. It's no different in the market. How can we possibly judge the S&P500 without opening it up first to see what's happening among its components.
Today we're going to focus on the sectors themselves. We're looking at weekly candlestick charts for all of the 11 major sectors:
Technology
Real Estate
Energy
Healthcare
Financials
Consumer Discretionary
Consumer Staples
Utilities
Industrials
Materials
Communication Services
How many sectors are making new highs? How many are making new lows? Are more of them starting to trend higher or are more of them starting to trend lower. In which direction are consolidations resolving, higher or lower?
Market Breadth means a lot of things to a lot of people. The way I see it, we're analyzing a market of stocks. There are a variety of tools to help us do that including the Advance-Decline Line, List of new highs & lows and the percentage of stocks getting overbought or oversold, which can be calculated in many ways. Today I'm joined by Andrew Thrasher in a video we shot earlier this month in New York. It's an important topic and I'm glad we had the chance to discuss it.
Shocking as it may seem, not all stocks and sectors are knocking on the door of new all-time highs. The clean energy sector is one of those neighborhoods. But that hasn't stopped us from digging in to find an opportunistic trade.
Wednesday's Mystery Chart is one of my favorite charts in the world.
First off, I want to thank everyone for your feedback and participation, as always. I received a lot of answers and most of you were buying the breakout along with me, while a few of you were looking for an "oops" to get short and fade it.
Many people are surprised that we are back to where things first fell apart for the S&P500 and Dow Jones Industrial Average last year. We had a severe correction in Q4, and now prices have climbed back to where this all got started. At this point, nothing surprises me anymore. Those who are still "shocked" by anything probably haven't been doing this very long....
The question we find ourselves asking this week is simple: Are these major US Stock Market Indexes going to fail up here, like they did in October, or will they break out and rip to levels never seen before?
One of my good college buddies always busts my chops because he thinks it's ridiculous that look at charts all day. Today he calls me about some other stuff, but randomly asked what was my favorite chart. I'm like, "...of all time or right now?". He said right now, what's my favorite chart?
It got me thinking. But my first reaction was the SPX/CRB chart. This is one of the most fascinating situations in the world today.
I saw a couple tweets yesterday about FAANG stocks and their "lack of participation" in the market's four month rally and just don't get it.
First it was a problem when the largest stocks in the S&P 500 were leading. Now it's a problem that most aren't hitting all-time highs with the S&P 500.
For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.
The point here is to not guess what it is, but instead to think about what you would do right now.Buy,Sell, or Do Nothing?
Recent price action in a tech name has us opportunistically wading in to catch a possible earnings driven bounce. We don't often put trades on in anticipation of a reversal of price action (we tend to be drawn to trends), but in this case we have a stock that has pulled back in recent days to a major past breakout area and we've got an earnings event coming up that just may be the grease which gets the wheels turning back in the direction of the broader trend.
