If you’re one of those people who blindly looks at the S&P500 and thinks stocks are in an uptrend, you can stop reading now and carry on with your rainbows and butterflies. In the real world, the one we live in, stocks have been falling hard for well over a year. Put down your large-cap weighted U.S. indexes for a hot second, and take a look at what’s going on. [Read more…]
[Chart Of The Week] The Divergence Between U.S. Stocks and Other Developed Markets
When we talk about “the stock market”, some people are referring to the S&P500 or maybe the Dow Jones Industrial Average. But these are just 2 large-cap indexes in one country in the entire world. Cliché or not, this isn’t a stock market, it is a “market of stocks”. These come in all different sizes and countries around the world to collectively make up a “stock market”.
It’s interesting to compare markets around the world to each other to get an idea of where the relative strength lies and where the weakness might be. Today we’re taking a look at the S&P500 in the U.S. vs the Nikkei in Japan and the EuroStoxx50 in Europe. [Read more…]
[Chart Of The Week] In Which Direction Are Energy Stocks Taking Crude Oil?
Back in January, Energy Stocks put in their lows on both an absolute and relative basis. Whether you’re looking at the big Integrated Names like Exxon and Chevron, or the Services Companies like Schlumberger or Halliburton, or even the Explorers and Producers, they all bottomed in January, a month before Crude Oil finally put in its low. Energy stocks also bottomed first on a relative basis when compared with the S&P500.
Today we are looking at the current implications of this particular leadership in the stocks relative to the commodity and the direction in which they are heading: [Read more…]
Spreadsheet Of The Week: Global Stock Market Breadth Is Deteriorating
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. [Read more…]
[Chart Of The Week] The Most Important Sector In The World Today
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. [Read more…]
[Chart Of The Week] The Impact of Amazon Not Being A Tech Stock
The debate about whether Amazon is in the Technology Sector or the Consumer Discretionary sector is really a pointless one. It isn’t anyone’s opinion that Amazon is in the Consumer Discretionary Sector. Amazon IS in the Consumer Discretionary sector. In fact, it represents close to 11% of the S&P Consumer Discretionary Sector Index. Amazon could double tomorrow or go to zero and it will have no impact on the Technology sector. Do you know why? Because it’s not in the technology sector. It’s in Consumer Disctretionaries.
Anyway, the point is that Amazon has been carrying Discretionaries because of its enormous weighting. But take a look at what the Discretionary space looks like if you take this market-cap weighting out of the equation: [Read more…]
[Chart Of The Week] Why This Leading Sector Is About To Get Crushed
Contrary to popular belief, we’re not here to be right. We’re only here to make money. As market participants, we’re not journalists or economists or side analysts. It’s their job to be “right”. So when they’re wrong, they like to call it a “revision”. But when we’re wrong, it’s called “a loss”. See the difference? So since we actually put money to work and take real risk, we need to be responsible with how much risk we take. Therefore, we need to make sure that the potential reward far exceeds the amount of risk being taken at a given time.
Today we’re looking at a good example of this favorable risk/reward scenario in a sector that I think gets crushed going forward: [Read more…]
[Chart Of The Week] U.S. Stock Market Breadth Has Weakened in April
When the major U.S. Stock market indexes are making new highs, you want to see the list of stocks making new highs increasing along the way as well. This had certainly been the case throughout February and March, but has come to a complete halt this month. Looking across the board, the S&P500, Dow Jones Industrial Average, Nasdaq 100, Russell 2000, Mid-cap 400, etc have all made new recovery highs over the past couple of weeks, since our epic bottom in late January/early February. The problem is that 1) all of our upside targets have now been achieved where we wanted to take profits and 2) breadth in the market now stinks. [Read more…]