Throughout the week we've been raising some caution flags about the short-term direction of Equities (here, here, and here).
Now that we're seeing some downside follow-through for the first time since December, I wanted to outline a few more potential short setups on an absolute and relative basis.
First let's start with why I'm looking at these sub-sectors to begin with.
The S&P Midcap 400 Consumer Discretionary is one of the cleanest charts I see out there on an absolute basis, with well-defined risk and reward/risk clearly skewed in favor of the bulls. Since there's no ETF to trade this, I had to look through some of the individual components to see how we can best express this thesis in the market.
On this podcast episode, we're flipping the script a bit. I was invited to come on the DailyFX Podcast hosted by Tyler Yell last week, and I wanted to share that audio with you here today. In this conversation, we discuss the recent Chart Summit in Breckenridge, CO, how and why I started Allstarcharts.com and what trends I'm currently seeing in the market. One thing we also talked about was the benefits of journaling and writing ideas down on paper. I really enjoyed this conversation so thank you Tyler Yell and DailyFX for inviting me on.
Last night I was working on an International and Fixed Income ETF Report that went out to our Institutional Clients, but I wanted to highlight an important theme that I saw during my analysis.
In our February Conference Call we outlined the potential for some mean reversion in the Mid and Smallcap Indexes as they retested their 2018 lows, as well as the implications of a breadth and momentum improvement if we got it. We did, so let's take a look and see what it means.
The market has been a one way street since late December, but last week we put our our first short ideas since Q4 and Sunday night we wrote about some near-term risks that were emerging. Things are potentially changing.
At the Index level things are a hot mess, but under the surface we're starting to see traffic moving in both directions...and that's perfectly normal! Stocks go up and down. Let's take a look at what we're seeing.
People love bragging about their best trades and how much money they made from them. I think it adds much more value to talk about the worst trade I ever put on and share the lessons I learned with all of you. This is one mistake that I will never forget and I have been a better investor because of it!
In late December I highlighted a few things from a weekend of charting that suggested improving risk appetite in Equities, one of which was a potential bottom in Crude Oil. Today I'm seeing the opposite, so I want to look at the near-term risk Crude Oil poses along with a few other things.
One of the most valuable parts of my entire process is going through my workbook of Monthly Charts (only) at the end of each month. It's easy to get lost in the day-to-day noise, but this exercise forces us to identify the direction of the primary trend.
During my review, there are always a few of them that stand out. Today I want to point out what’s happening in Americas largest sector. This is a chart of the Technology Index Fund $XLK successfully retesting those March 2000 highs and trying to rip higher:
With a new month comes a fresh batch of Monthly Candlesticks. As you are all well aware, I find this exercise to be incredibly valuable. It forces us to identify the direction of the primary trend.
Today we got new Monthly Candlesticks and while updating the chartbook for our Premium Members, I couldn't help but think the chart below describes the environment we're currently in quite well.
