People love to hear a good story. We have an evolutionary desire to gossip and be told stories even if we know they’re untrue. As Sapiens, it’s important to know this about ourselves. But you know who definitely knows it? The media. And they’re going to use that desire against you every single day for their own profit. They will tell you stories all day every day as long as you’re willing to listen. They’re so thirsty for your attention that they’ll tell you anything just so they can sell ads to their precious sponsors. It’s their job to make the noise. It’s our job to ignore it.
Today, I’m going to show you the chart that actually tells the real story about what is going on in today’s market. I comb through thousands of charts a week and I can tell you for a fact that there is one underlying theme that I’m seeing across the board: Stocks, Sectors and Indexes, and that is the Overhead supply we’ve been stuck below since early last year.
This is a chart of the Global 100 Index. Even though this is a majority of U.S. exposure, it’s a more global index and I think shows exactly what is taking place right now. We rallied in stocks (around the world) into early 2018 and then sold off. In most cases, stocks rallied once again into that area late in the 3rd quarter, and once again were met with sellers. More recently, we have returned to this area and failed once again:
Here’s the key though. There have been some stocks and some sectors, and even a couple of International Indexes, that have exceeded last year’s highs. The “problem” is that only a tiny fraction of stocks, sectors and indexes have exceeded those former highs. A large majority are still below. For the major indexes to advance and begin a new leg higher, it’s going to take more participation.
Some of the other charts have exceeded former highs and failed. And some, like U.S. Small-caps, haven’t even returned to last year’s highs. Overall, however, I think this chart above tells the story the best. We’ve rallied into this area and failed all three times. Why? Because there are more sellers than buyers at those levels. Until the demand for stocks is able finish absorbing that overhead supply, stocks are going to remain below this “resistance”, as we like to call it.
I am still in the camp that the resolution will be higher. I have not seen enough evidence that suggests these are all major distribution tops. The higher probability outcome, in my opinion, continues to be an upside breakout.
The way I learned it was that the more times a level is tested, the higher the likelihood that it’s going to break. Where I grew up, triple tops don’t exist, or are so rare that it doesn’t pay to bet on them showing up.
I believe we break out, but that we also need more time. Will we get it by July 4th weekend? Maybe. I give it a 50/50 shot. But I do think it’s coming.
We’ll continue to reevaluate as the data keeps coming in.
This is what one of our newest customers told me today about last night’s conference call:
Great stuff JC and enjoyed your analysis and insights/charts as a new premium member on my first monthly conference call. Thank you and your team for all the hard work and preparation that goes into what you guys do on a daily basis I found the call both helpful and informative in augmenting/validating some of my own research and investment strategies” – John B.
Thanks for that John! Means a lot.
Why don’t you check out the video for yourself and tell me what you think. You have nothing to lose!