Cryptocurrencies have enjoyed a nice few days after a long rout, meaning my timeline is now filled with Bitcoin charts and the like. To be honest I've been so busy with charts for Allstarcharts India that I hadn't checked my crypto charts in a while. Well, I'm glad I did because the chart of Ethereum is a textbook example of a core Technical Analysis concept, polarity.
Last month we wrote about short opportunities in GBP/JPY and AUD/JPY that took some time to develop, but are finally starting to work. Today we're going to focus on the US Dollar as the Dollar Index is up roughly 8% since bottoming on February 15th, and even moreso against many currencies not represented in the index. While the Dollar Index may be extended a bit in the short-term, there have been several moves that look like the start of long-term trends that we want to be a part of.
Although most market participants are fixated on the gyrating US equity markets or Italian bond yields, two trade setups have formed elsewhere in the currency markets.
This is the most valuable analysis I do every month. When you sit there with some music on and just rip through monthly charts, it really gives you perspective. We're taking a step back and reanalyzing the trends. It's easy to get caught in the day-to-day noise. This exercise helps avoid getting whipped around. I encourage everyone to make their own list of Monthly Candles.
This weekend was our second annual Chart Summit. I still can't believe all the amazing feedback that continues to come in after this event. Thank you all from the bottom of my heart, both the presenters and the audience members. I didn't think we could make something even better than the original, but I think based on the responses, we may have actually pulled it off. Wow!
Our video production folks are hard at work putting all the videos together, but I've picked out the ones I did so I can share with all of you as soon as possible. The rest will be out this week.
Since September we've been in the camp that the US Dollar is heading higher and potentially a lot higher. So if you want to be long the US Dollar, that is one way to take advantage of it. Short Euro has been another. But my favorite has been to be short the Gold Miners, particularly the more vulnerable Junior Gold Miners $GDXJ. So far this is working well. But I think it's worth reiterating that we, in general, want to approach the marketplace within the context of what we think will be a rising US Dollar environment.
Today we're taking a closer look at what's going on here:
They say not to kick someone when they're down. But in the market it's the opposite. When they are down is exactly when you want to kick them. This is especially the case when they are down while other things are up. We don't want to be shorting the strongest stocks. We want to be shorting the underperformers where the holders are losers, they're wrong, stuck and need to get out, but can't. We are here, not only to make money on the upside of things, but also to benefit from the losses of others. When this pain starts to really set in, that's when we want to kick them, when they're down!
In this case I have 3 examples of people who are down. This is in the face of stocks ripping:
You guys know how I feel about equities. We've been on the right of the trade while all the gloom-and-doomers and noisemakers are pulling their hair our of their heads trying to figure out why stocks won't fall. To me, it's been fairly clear: Stocks are in uptrends and that's what stocks in uptrends do, they go up. This has been the trend globally, domestically, large-caps, small-caps, you name it. Talk about breadth expansion, I couldn't tell you the last time I saw this much broad participation out of equities. I encourage you to go through the Chartbook and look through all of the International Stock Indexes, U.S. Averages, Sectors, Dow Components, Transportation Components and additional Stocks of Interest.
I can't tell you guys how important it is to stop whatever you're doing and take a step back. It's so easy for us to get caught up in the day to day noise and forget about the underlying trends in the market. We're human. We're built to be this way. But recognizing this flaw is an important step in correcting it and trying to benefit from the fact that others are unaware. One of my favorite ways to do this is to look through a series of Monthly Candlestick Charts at the end of every month. Remember, we don't want to look at these mid-month as candles are incomplete. It is the final results that we are most concerned with.
We want to use this bigger picture strategy to identify the directions of the underlying trends in the market. This goes for all markets: Stocks, both U.S. and Globally, Interest Rates, Precious Metals, Energy, Currencies, etc. This is how we know what the trends are so we can then go to our weekly and daily charts to look for more tactical opportunities within those ongoing trends. This is a very important element to our top/down approach.
One of the more interesting scenarios across the global market place is what is happening in the US Dollar, and the Euro component more specifically. Remember, the Euro represents a majority in the entire US Dollar Index. On Monday, the Euro engulfed the prior 13 trading sessions. This means that it made a new low, below the past few weeks trading, and then reversed to close at a new high, above any of the highs over the past few weeks.
Over the past few days I've received requests from readers about my thoughts on Russian stocks. While I don't particularly care about the US/Russia relations when it comes to picking stocks to buy and sell, it seems to be something of interest to a lot of people. So let's dive in.
