The noise surrounding the U.S. Interest Rate Market has been all Fed all the time. For headlines and theory, that's great. For market participants who live in the real world, we like to focus on what the market is actually doing, not what a group of economists may or may not be thinking 8 times a year.
The real story is not what the Federal Reserve is saying. The story is that the yield curve is and has been narrowing. In other words, the spread between long-dated Treasury bond yields and short-term yields has been getting smaller and smaller. Notice how 2-year yields are hitting 5.5-year highs this week, but 30-year yields won't budge as they remain near the same levels from a year ago.
There are plenty of charts that tell this story well, but I think these two
Thank you to everyone who registered for the new All Star Charts membership. I'm super excited to have you guys as part of our team. Remember, we're all in this together trying to navigate through this market day in and day out. It’s a puzzle that is constantly evolving and what we’re here to do is look for major trends around the world and then break those down to find more intermediate-term investing opportunities based on those structural setups. The new All Star Charts was an idea we’ve been working on for a long time, so we couldn't be happier to finally be able to share the ideas and the homework that I already do with all of our new members. Welcome to our club!
For the past 2 months I’ve been very vocal about how there’s been no reason to own the major U.S. Stock Market Averages. If there’s been any trade to be made, it's
It amazes me how we're almost in 2016 and you still hear what I consider to be intelligent and experienced market participants talk about technical analysis as a self fulfilling prophecy. A statement that technical analysis is self-fulfilling is suggesting that there are events in the market that are caused directly or indirectly by the preceding prediction or expectation that it was going to occur by a group of market technicians. I can understand when a new investor who doesn’t know any better uses the phrase because maybe he/she heard it once before and it sounds smart. That’s just human nature and you can’t fault them for it. But you guys who by now should know better? Come on.
This is a topic that I've brought up before but I think is worth mentioning it again as it has come up in conversation a few times recently. The problem is that this is such a ridiculous claim that I feel stupid even acknowledging it. But I'll address this again anyway.
Last week I invited everyone to jump on a conference call to discuss what I think are the best 10 charts in the world. I don't want you to think that these are just the 10 best trades, or 10 strongest stocks, or anything like that. It's bigger than that. This list is what I consider to be the 10 most important trends, or changes in trends heading into 2016. If you watch the video, I included 2-3 charts or data points as a supplement to each of the top 10 charts. See:Video Here.
For supplemental charts and further explanation of each of the top 10, please see the full video:
The other day I told someone that I never look at the 50 Day Moving Average and that I haven't for a few years. They couldn't understand why. So I had to explain that it's something I used to keep on my charts, but over time I noticed that it created more noise for me than value, so I eliminated it from my arsenal. I've done this with a lot of technical tools over the years and preferred a more Keep It Simple Stupid approach over a more complicated process.
This whole technical analysis thing first started for me back in 2005 when I realized that I didn't know anything about the stock market. What scared me even more was that there were people sitting around me at work who were twice my age, and in some cases 3 times my age, that swore up and down that they had a handle on the market. I guess I was just lucky at the time to be aware enough to realize that these guys didn't know anything and were doing themselves and their clients a disservice.
I'm glad that you guys are enjoying the weekly letters that I've been putting out since last month. Thanks again for all the great feedback you've been giving me via email or twitter and stocktwits.
This week I wanted to take this to another level and have us all jump on a free conference call to go over what I think are the 10 most important charts in the world. This includes US Stocks, International Markets, Commodities including Metals and Energy, Currencies and US Interest Rates. We will also leave plenty of time for specific questions and chart requests from attendees.
We have to trade and invest in the market that we have in front of us, not the one that we want. Therefore we have to be able to approach the market from a completely unbiased perspective. We don’t care if the market doubles in price or if it gets cut in half. We want to try to take advantage of moves in both directions. This is America after all.
I know it’s not sexy, but since October 23rd, we have wanted to approach the major U.S. stock market averages from a more neutral perspective. This is the day that both the S&P500 and the Dow Jones Industrial Average first got above what was then, and still is, a flat 200 day simple moving average. Securities in that sort of environment create headaches, for both the bulls and the bears. The reason is because
there is no trend. Sure enough, prices this week are exactly where they were on October 23rd. This should not be a surprise and in fact, should be expected. But what does stand out is the dramatic underperformance in
If you know anything about me you know that I can't stand when prices are near a flat 200 day simple moving average. It's not that I want to short stocks in those situations. I don't want anything to do with them at all. You're signing up for a headache, I'm telling you. Breakouts tend not to hold and breakdowns usually don't hold either. The reason is that there is no trend when prices are near a flat 200 day moving average. Markets trend by nature, but when they're in this particular situation, they don't. Why would you bother with the one scenario where you know markets are not trending?
I think the S&P500 is a great example of why we want to stay away when price is near a flat 200 day. Headline writers like to make a big deal when price breaks above or below this particular smoothing mechanism, but 99% of the time they fail to mention the direction in which that moving average is heading. Is it upward sloping, downward sloping or flat? This is the more important question to ask. Not that price got above an invisible line today.
For the past few weeks I’ve been writing a weekly open letter to readers about what I’m seeing across the stock market, bond market, commodities and currencies. The feedback I’ve received has been unlike any other time in the 5 year history of All Star Charts. I want to thank all of you for that. I think this is something that I will have to continue to do and make it a regular part of my routine. I’ve done this sort of thing in the past while managing money in order to keep our investors up to date on how we want to approach the marketplace. The format you’re seeing here is no different. Please feel free to keep emailing me and contacting me via Stocktwits or Twitter on how it can improve and what sort of things you guys want me to talk about.
Starting with the U.S. Stock Market, this as a group continues to be in no-man’s land. When price is near a flat 200 day simple moving average, the market is suggesting that there is
