One of the most valuable exercises throughout my process is going through every single country around the world looking at both weekly and daily charts. One by one I make my annotations and take my notes. This is certainly time consuming, but the process makes it impossible for me not to notice similar themes going on around the globe. I promise you from the bottom of my heart that the reason I got bullish in late January after being the biggest bear on The Street coming into 2016 was because of the behavior of global markets. My turning bullish had nothing to do with the U.S. stock market.
Valeant Pharmaceuticals (VRX) has fallen roughly 90% from its August 2015 highs, but is now potentially setting up for a counter-trend rally.
Structurally this stock remains in a strong downtrend, but is now testing long-term support near 25-27. Prices first tested this level in March and April of this year, rallied briefly, but are now slightly undercutting those lows as momentum attempts to put in a bullish divergence. If prices are above 27 on a weekly closing basis, that would confirm the bullish momentum divergence and failed breakdown.
Last week I shared a chart with you guys where I purposely left out the ticker symbol and y axis. The reason I post these mystery charts every now and then is to eliminate any biases that we all have in these markets. This allows us to approach a market and focus only on the supply and demand dynamics in order to forget everything else.
The most recent Mystery Chart was the U.S. 10-year Note Yield upside down. Here is the actual chart where you can see yields approaching the apex of these two converging trendlines:
One of the most valuable tools we have as technicians is the ability to go through every single stock in the Dow Jones Industrial Average and every sector and sub-sector in the S&P500 so that we can weigh all of the evidence. It might take some time, but I promise you that there is no better way to gauge the strength or weakness in a market, than by going through them all. Since most people don't have the time to do this work as regularly as I do, my annotations and notes can easily be referenced in the Chartbook.
Today I wanted to share some of my conclusions after running through all of the Dow Components and S&P Sectors on both weekly and daily timeframes. This analysis consists of over 120 charts and all of them have been updated today in the Chartbook.
Every now and then I throw out a mystery chart just to get us thinking. Not knowing what a chart represents helps eliminate biases and any ideas we may already have in our heads. Today we are looking at what I think is one of the more interesting developments in the market today.
This is a chart that has been in an uptrend for many years. After about 4 years of consolidation, prices appear to be breaking out above the upper of these two converging trendlines.
Every 2 weeks I sit down with the good folks at Benzinga to chat about the markets on their morning radio show. Today we went over why we want to be shorting stocks. We also talk about what this rally in Japanese Yen means to the U.S. and Japanese Stock Market. With this Yen strength combined with the deterioration in market breadth over the past 6 weeks, there is a lot more to be negative about than positive. Apple is a favorite short of ours and most of the U.S. and European Banks. In fact, it's hard to find a stock out there that isn't a short.
I think the bull case for the stock market starts with the European banks. When you talk about bull markets and uptrends, financials need to participate. There's no way around it. If you have European banks crashing to new multi-year lows, it's hard to have a sustainable uptrend in equities. As bearish as I am towards stocks these days, the bull case begins with this sector. It would be irresponsible of me not to recognize that.
Today we're comparing the Financial Sector in Europe to Financials in the U.S. This is a great visual comparison that we look for to determine whether or not there is risk appetite for bank stocks. If European Banks are the ones dragging down the space, we want to see them start to outperform U.S. banks as evidence of risk appetite. So far all we've seen is the exact opposite: new lows, new lows, new lows.
I'm a finalist at this year's Benzinga Fintech Awards in NYC! It's a huge honor to be included among some of the most innovative companies in the world today. This Awards Gala focuses on Fintech and we are up for Best Trade Ideas Research. I put in a lot time and effort into my work, so as a company, we couldn't be more thrilled to, not only be nominated, but be invited to the ceremony as a Finalist.
Every month I host a conference call for All Star Charts Members where we discuss ongoing themes throughout the global marketplace as well as changes in trends where new positions would be most appropriate. This includes U.S. Stocks & Sectors, International Stock Indexes, Commodities, Currencies and Interest Rate Markets.
This month's Conference Call will be held on Wednesday May 11, 2016 at 7PM ET. In this month's call, we will discuss the following topics:
- How Much Can The U.S. Stock Market Fall in Q2?
- Why European Banks Are The Most Important Sector On Earth
When we talk about the most important developments in the world today, we need to define who we are and why this is the case for us. We are market participants who have only one goal: to make money in the market. There are many others out there who are very loud, but are not here to make money in the market. Instead, they get paid to sell banner ads and tv commercials. This is the group that tends to lag price and prefers to focus on what is in the "news". Since price leads the news, these headlines and conversations typically show up well after the fact.
I think today we have a great example of this scenario and very clear conflict of interest.
