Our live Monthly Strategy Session concluded last night. For all the premium subscribers, this is where you can access/rewatch the video.
This post is an exercise we do for the non-members to give them an idea of the research we carry out at All Star Charts.
The Monthly Strategy Calls started out as a selfish endeavour whereby we wanted to stay in the loop and follow the big-picture trends. It’s like recentering your navigation system to avoid taking the wrong turn. Then we realised this could be helpful to you guys as well! Just to step back and identify the larger trend.
So here we will discuss the 3 Key Takeaways from the call:
1. Dow theory 101: The averages must confirm
To anyone who has been through the process of learning technical analysis, this should be almost like muscle memory. It is important that the Dow Jones averages confirm each other.
A cursory glance at this chart and you can tell that there is a divergence here. The only issue is, this is an important one. If the market has to resolve in the direction of the underlying trend, the Dow Jones Transportation Average must move higher. A failure of confirmation of this trend could take the current market mess, much longer to resolve.
Click on the image to zoom in.
2. All Country World Index Ex-US consolidating ABOVE crucial level
The All Country World Index excluding US (VEU) has been consolidating above a very very crucial level. This level is basically a 12-year base breakout level, so yes, it is extremely important. In the lower pane, we have the Emerging Markets ETF (EEM) which is right below its long term overheard supply zone.
If the VEU gets going, and we witness a follow-through in the breakout, then there is no reason to believe that the EEM will be left behind. This is an important chart to watch out for in terms of the future direction of the global market.
3. XLI is probably the most important chart in the world right now
The XLI is the Industrials sector in the US market. As we can see below, the price has been moving in the shape of a coil. We’re seeing lower highs and higher lows. Ideally, this would be a continuation pattern, what we call a symmetrical triangle. The resolution of this pattern is generally in the direction of the prior trend.
The industrials have an extremely strong correlation with the S&P 500. So for the market to continue to grind higher, the Industrials would have to rise up in support.
While there are sectors that are catching up and global markets that are indicating a turn higher, this is still an area of concern. All we can do is wait and watch.
These were some of the most important charts we discussed in the call last night.
Thanks for reading and please let us know if you have any questions.