The big level that I've been watching in S&Ps has been that 1880-1890 area representing support in August and September, which was also resistance back in early 2014. To me, this has been the big line in the sand. I see no reason to be short this market if prices are above those levels, and we're finishing up the week above it. So now what?
Structurally speaking, I don't think it changes anything bigger picture. We are still in a downtrend in U.S. Stocks as the weight-of-the-evidence suggests that we ultimately head much lower. We saw more new 52-week lows on the NYSE this week than we did at the August lows, an expansion in weakness, in other words. Financials have collapsed on a relative basis, hitting fresh multi-year lows
A big reason why I've been bearish towards the U.S. Stock Market is because I'm in the weight-of-the-evidence business and globally stocks have been getting crushed. It was only a matter of time before the selling came to the United States Index. A good example of a broken market making new lows is India's Nifty Fifty Index.
That was fun wasn't it? S&Ps lost a cool 13% since the last week of 2015. You think that's a lot? Emerging Markets lost 16% during that period. The Russell 2000 Small-cap Index lost over 17%. Micro-caps lost over 18%. 13 is nothing. And get used to it, because I think there is a lot more selling coming.
Today, we're going to focus on what the S&P500 looks like because that is what all of you keep asking me about. I like to look at stock markets from a more global perspective, taking into account what other asset classes are doing like commodities, currencies and interest rates. Remember, I'm in the weight-of-the-evidence business. I believe that in order to navigate through what is a constantly evolving global marketplace, taking the weight-of-the-evidence is the best approach. But today, we'll take a deep dive look at S&Ps on their own.
While everyone is making a big fuss about S&Ps making new lows, or Oil hitting new lows, or the amount of stocks in the NYSE hitting new lows, believe it or not, there are plenty of things making new highs. So although we've been bearish towards the U.S. Stock Market for months and could not be happier to see stocks continuing to sell off, today I want to focus on something that is making new highs.
This is a 20-year chart of Gold relative to the CRB index. This index is comprised of 19 Commodities including Crude Oil, Copper, Corn, Sugar, Gold etc. We consider the CRB to be the benchmark for the commodities markets
Today I want to point to a chart that a really smart friend of mine has been sending me for months. He prefers to remain nameless, you know how these sell side guys roll, so we'll just call him Mr. T. In this Chart, Mr. T has been telling me since the Fall that the Regional Banks vs REITs ratio is suggesting that U.S. Interest Rates are heading lower, specifically the U.S. 10-year yield.
On the top frame, we're looking at the Regional Bank Index ETF $KRE over the REITs Index ETF $IYR. In this case, the numerator, Regional Banks, do relatively well when the market thinks rates will rise, while the denominator, REITs, do relatively well when the market thinks that rates
When I read about the Telecom sector or speak with colleagues about it, I find many people often think of it as a collection of companies with strong balance sheets, great cash flows, and shareholder friendly actions like juicy dividends and share buybacks. While that may be true in many cases, that doesn't necessarily mean that the sector can be utilized as a bond proxy to boost a portfolio's yield. As we saw in recent years with sectors exposed to high-yield, and MLPs, there's no such thing as a free lunch. In addition to that, simple math shows that Telecom hasn't been correlated with bonds (TLT) at all over the past ten years, with the correlation being 0.29, 0.19, and 0.08 over the past one year, three years, and ten years, respectively.
If you had adopted the above philosophy, stuck this sector in your portfolio and hoped for the best, you've seen that
In all markets, there are uptrends and there are downtrends. And then, of course, there are periods where there is no trend at all and it's just a mess. Ultimately these messes find away to clean themselves up and a new beautiful trend is born. This is just the evolution of markets, that by definition trend. It's our job to try and find them early in their growth, or, on the other hand, look to benefit from the downside of an aging and changing trend.
It's the sideways markets with no trend that'll get you. This is what some of us refer to as a chopfest, and is exactly what we've seen in the 10-year note yield over the past couple of
With Natural Gas futures up roughly 48% since the December lows, the urge to call a bottom in this asset class is quite strong. However, history tells us that the most vicious rallies occur during bear markets, which may suggest that current levels offer a decent risk/reward on the short side.
Before taking a look at price, it's important to be aware of current sentiment and seasonality data within its proper historical context. In terms of sentiment, the recent rally has allowed a number of things to occur
This year has gotten off to an awfully noisy start. When you consider that most of what we've seen in the first week of 2016 is just a continuation of ongoing trends, you would think that people would consider this to be normal. But since there is a change in calendar, people rather freak out and the noise levels are spiking for little reason. Trends typically continue, rather than reverse course. So why should a change in the calendar year make that any different? It doesn't.
I want to invite all of you this Thursday January 12, 2016 to a FREE Webinar that I'm putting on where we will all remain calm, go over the biggest ongoing themes across the global marketplace, and figure out how to continue
With all the noise surrounding the recent sell-off in the U.S. stock market, it can be easy to forget that there are some areas of the market doing much better than others, and there is a lot of money to be made in the widening of those spreads. This is where intermarket analysis and ratio analysis can really become profitable for a portfolio. Today we are looking at the biggest companies in America, as a group, breaking out to new highs relative to the smallest companies in America: the Micro-caps.
What this ratio tells us, as investors, is the direction of the flow of money. Are institutional dollars flowing into the riskier, smaller companies in the stock market, or is it going into the larger, more traditional, relatively safer segment of the market that is, the Mega-caps. To me, there is no better gauge out there for the Mega-caps other than the old Dow Jones Industrial Average. The 30 components that make up this Index are 30 of the largest companies in America: Apple, Microsoft, Exxon, JNJ, General Electric, etc. When we compare this group to the Russell Micro-cap Index, we get a very clear picture of the direction of money flow.
Ladies and gentlemen, let me introduce you to Tom Bruni @brunicharting
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Non-Correlated Short Setups In Live Cattle
With every global equity market down to start 2016 and media outlets declaring "Markets In Turmoil", it can seem like there are no opportunities to make money in this environment. While it may be true that it's difficult to press shorts while stocks are extended in the short-term, and even more difficult to try to make money on the long side until global markets stabilize for a few days, as market participants we can look at all liquid asset classes around the globe for opportunity.
With that being said, Live Cattle Futures are a non-correlated asset that look interesting on the short side.
From an structural perspective, Live Cattle Futures
We're down 9% from the all-time highs in the S&P500 and I see people acting like 2-year olds that just had their favorite toy taken away from them. "Markets in turmoil".....really? Why, because the market is down 9% from it's highs last year after rallying over 220% over the prior 6 years? Please.
If you don't live in a box and have access to any data that came before tinder was invented, you'll easily be able to see how perfectly normal it is for markets to go both up and down. As someone who looks at stock markets all over the world, commodities and currencies, I see things get absolutely destroyed all the time. Look at the British Pound lately, look at the agricultural commodities,
