Welcome to the second edition of “Louis’ Look”, where I share the key lessons I’ve learnt over the past week through interning at All Star Charts. You can read the first post here.
As with any week working with this bunch, plenty was learnt, so let’s jump right into it.
Welcome to this week's edition of "Under The Hood." You can read more about the column here.
What we do is analyze the most popular Robinhood stocks over the trailing week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
This was another interesting week as the market continues to grind higher with zero regard for whatever bad news is thrown at it. With the S&P 500 knocking on the door of new all-time highs, let's take a look at what Robinhood investors were buying this week.
One thing I've learned very quickly through writing this column each week is that contrary to popular opinion, these Robinhood investors are more often than not on the right side of the trend.
I’ve been incredibly fortunate to become the latest intern here at All Star Charts and as a part of the role, I’ll be writing a weekly note for the blog - documenting what I’m learning about technical analysis from the perspective of an intern.
Without further adieu, let’s jump into what stuck out to me this week.
What do we know for sure about New All-time Highs?
We know for a fact that they are NOT a characteristic of a downtrend. We've gone back and done the work, and as it turns out, New All-time Highs are normally things we see in uptrends!
With the S&P500 going out at New All-time Highs yesterday, and the Nasdaq making it now 3 months in a row of all-time highs, is the bet you want to make that we're in a downtrend for stocks?
This 10-month moving average strategy is one of the more simple, yet effective trend following systems that I know of. If the S&P500 closes the month above its 10-month moving average, we want to be long. If the S&P500 closes below its 10-month moving average, we do not.
Last week we retired our "Five Bull Market Barometers" to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is our first edition, so let's jump right into it.
This is a market of stocks, and not just a "stock market".
All of these Indexes, from the Dow Jones Industrial Average to the Russell2000 Small-caps, are made up of components. There are 30 stocks in the Dow and 2000 stocks in the Russell2K, for example.
Are more of them going up? Are more of them making new highs? Are more of them showing bullish momentum characteristics? Are fewer and fewer components doing these things as the indexes make new highs? What about in downtrends? Are more stocks confirming the new lows in the indexes or are fewer and fewer stocks making new lows and showing bearish momentum characteristics as the market makes new lows?
The answers to these types of questions is what we call, "Market Breadth Analysis". There are a lot of ways to do this on all sorts of different time horizons. In this lesson we go over all the methods we use to decipher market breadth, which can be used by both individual traders and the largest financial institutions in the world.
Why does Technical Analysis work? Because markets trend. No one can argue that. I don't care who you are. And what do we do as technicians? We look for trends!
I was recently a guest on the Trends With Benefits show. It's the perfect name for a podcast about the stock market, especially when you invite someone like myself, who is constantly looking to benefit from underlying trends in the market.
Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.
This week's main theme is that the strong continue to get stronger and vice versa, which we'll highlight in our Industry and Sector ETF tables, below.
Notice how the top three performers this week also happen to be the only Industry ETFs that are positive over the trailing 3-month period?
Gold Miners (GDX), Biotech (IBB), and Internet (FDN) posting positive 3-month returns may not sound like much but is actually quite impressive as it means these areas have already taken out their highs from just before the broader market peaked and collapsed in February.
Earlier this month we outlined the "Five Bull Market Barometers" we're watching to identify the beginning of a new bull market in stocks.
In this post, we'll update those charts without going into as much detail as to why they're important. So if you haven't read our initial post linked above, we'd encourage you to check it out.
With that said, let's jump in and see how these charts have developed since.
This is our monthly conference call for All Star Charts India Premium Members where we discuss ongoing themes throughout the Indian Stock Market. We employ a top-down approach and consider the global behavior of the four primary asset classes: Fixed Income, Currencies, Commodities, Equities, before moving into Indian stocks.
From a stock market perspective, we begin by analyzing all of the Nifty Major and Sector/Thematic Indexes, as well as some of our own custom indexes that help us understand how the average Nifty 500 stock is performing. After identifying the clearest trends at the index level, we outline which stocks are best positioned to take advantage of those trends.
By focusing on the core tenets of momentum, relative strength, and market trend, we put the probabilities of success increase on our side. We'll do our best to lay out our weight of the evidence conclusions and walk you through the steps of how we got there!
This week's Mystery Chart was a simple yet pivotal one... it was a ratio chart of Stocks vs Treasury Bonds.
With stocks struggling at resistance this week and Treasuries meandering beneath all-time highs, both appear to be at key inflection points.
Making things even more interesting is that the S&P 500 (SPY) relative to 20+ Year Treasury Bonds (TLT) ratio is also at a key level of interest. It is make-or-break time for these two asset classes so let's dive in and see what's going on.
