This past week during our first Conference Call of 2019, we discussed the continued lack of direction in the indexes and how the relative strength in Financial Services and Consumer Goods stocks was being offset by the weakness in IT and Energy.
By Friday we finally saw some rotation back into Energy, but there are signs that the major indices won't be off to the races just yet.
Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. By my unprecise and unscientific count, many of you said you'd do nothing and wait for the range to resolve itself, while others were anticipating a breakout.
So today, I want to reveal the full chart and share why I feel it's relevant.
Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. Many said that it looked like a downtrend and that a neutral/bearish approach appeared best. I agreed.
So today, I want to reveal the full chart and share why I feel it's relevant.
While I'm still not convinced we've seen "the" low in the recent correction/bear market, the recent daily price action of the indices sure is doing its best to chisel away at my resolve. And it at least has me considering adding some long exposure to my portfolio, if for no other reason than a hedge.
Earlier this week, All Star Charts published a free post titled A "Loco" Trade Idea. I liked the idea so much I'm gonna copy the guys and layer in a simple options play to take advantage of the outlook.
When it comes to stock market bellwethers, I can think of very few that are as important as J.P. Morgan Chase. If you look at a chart of the S&P500 going back decades and a chart of the JP Morgan, they look exactly the same. This brings me to our current dilemma. As J.P. Morgan goes, so goes the rest of the market right?
If that's the case, then this stock market has its work cut out for it. $JPM broke some serious support levels last month that have kept it below overhead supply, and that's a problem for the bulls.
One of my favorite exercises in our process is the use of "mystery charts." Essentially, we take out the x and y-axes and and all labels to eliminate any biases. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted.
The point here is to not guess what it actually is (though most of you will try), but instead to think about what you would do. Buy, Sell, or Do Nothing?
One of my favorite exercises in our process is the use of "mystery charts." Essentially, we take out the x and y-axes and and all labels to eliminate any biases. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted.
The point here is to not guess what it actually is (though most of you will try), but instead to think about what you would do.Buy,Sell, or Do Nothing?
Some of the most important stocks in the world are at such critical levels that we'd be fools to ignore it.
More specifically, I'm referring to Financials: Broker Dealers and Regional Banks in particular.
As we are all aware, Financials peaked in 2007 before the epic collapse throughout 2008 and into early 2009. The repercussions of those events were felt all over the world. Some people are calling for a repeat of that period. Could we actually see it? Maybe. But I think it's going to depend a lot on the outcome of the current battle taking place between buyers and sellers at one of the most critical levels in the history of these stocks.
As part of my weekly review I went through the entire S&P 1500 across on both the weekly and daily timeframes to identify long and short opportunities, as well as any major market themes.
Unfortunately the evidence is still mixed when it comes to the market's next directional move, but there was one chart that I wanted to point out because it reminded that opportunity can often lie where you least expect.
It's a great trade idea, but it also is a great reminder that while the major stock market indexes may not be trending, there's still plenty of opportunity on both the long and short side of this "market of stocks".
Yesterday I discussed how we use ratio charts to identify trends for both trading opportunities and information that we can use to make inferences about the stock market's next major move. Today I want to look at an inter-market relationship between Base Metals and Precious Metals that may help provide information about where interest rates are headed.
The S&P 500 has rallied more than 10% off its late December lows, making the reward/risk on the long side a lot less favorable as many of the major indexes and sectors approach overhead supply. When the market is at a point on an absolute basis where the weight of the evidence is mixed, the use of ratio charts to identify the trends that are happening under the surface becomes even more valuable.
