This is my favorite time of the month - preparing for our Live Monthly Conference Call. It really gives me an opportunity to gather all of the evidence, put my thoughts and ideas down on paper and then explain it all in under an hour. It's all pretty awesome!
In this call we talk about the US Stock market and where it fits within the Global Market complex. Throughout this process we're also analyzing the commodities, interest rates and currency markets that apply to each country. Only then do we break things down to individual sectors and their sub industry groups to finally find the best stocks to express a bigger thesis.
We call this the top/down approach and I'm pumped to go through it all on Tuesday's Call.
In this Episode of Allstarcharts Weekly, Steve and I are focused on expansion of global breadth. We're seeing more and more countries around the world breaking out to new 52-week highs. This week the Global 100 Index is making new highs and now Taiwan has also joined the group with Brazil and Switzerland who were already doing so. With Sweden and Japan right there near highs as well, the breadth expansion continues, not the deterioration that the bears are preaching. It's hard to be bearish equities if the Dow Jones Industrial Average is above 27,000 and the German DAX is above its 2015 highs. Those are the key levels we're watching. But breadth is expanding, not deteriorating. That's for sure.
The trend for NIFTY stocks is up. That has not changed. Like many stocks and indexes around the world, NIFTY been mostly stagnant since early 2018. Unlike most stocks and indexes, however, NIFTY has managed to put in higher lows and higher highs along the way. So it's not just a consolidation.
I do believe NIFTY resolves this consolidation higher and heads up towards 13,000 - this is the target:
It's been a while since we talked about the Dollar. The truth is, this trade has really been a Nothing-Burger all year. G-10 currencies have been a snooze-fest until just recently. I have good friends who specialize in this space and they're bored. That's not good for their business, but I have a suspicion that things are changing.
Let's get right into it. Here is the US Dollar Index breaking down on a weekly timeframe and unable to hold its previous highs. This sort of thing reminds me a lot of early October 2018 for US Stocks. From failed moves come fast moves, is how I learned it. I've also come to understand over time that this is not something to be afraid of, as many books often hint to. I think this is something to embrace. It presents the best risk vs reward opportunities of any other setup I know:
Remember Crypto Currencies? The conversations over Thanksgiving dinners in 2017 were really something. It feels like just yesterday we were still feeling the euphoria of the Crypto Craze.
So now what? What's happened since the epic 80%+ crash that destroyed the hopes and dreams of the greedy fools that fell for the 'get rich quick' appeal of the "new currency" (that wasn't really new at all)? Where is Bitcoin today?
I want to make something perfectly clear: Semiconductors breaking out of a 6 month base to new all-time highs is historically not a characteristic of a downtrend for semi's, tech, or US Stocks as an asset class. These are facts. As go Chip stocks, so goes Tech. And in case you forgot, Technology is a quarter of the entire S&P500.
Feel free to argue against me on this. You'll lose. Semiconductors going up is NOT bearish for stocks. In fact, I can think of few things more bullish.
Here is a Monthly Chart of the PHLX Semiconductor Index $SOX breaking out to new all-time highs:
We've been bullish precious metals since the 4th quarter last year and even coming into 2019. We're not gold bugs, thank goodness. The risk vs reward was just skewed in favor of the long side, for a variety of reasons.
One of those was the fact that commercial hedgers were actually net long. They're never net long, and literally always hedged. For me, these Commitment of Traders reports are usually just noise, EXCEPT when they're at extremes. We want to pay attention when the rubber-band is stretched. And so we did, and Gold ripped!
Now we have the opposite scenario. Commercial Hedgers last month had on their largest net short position in history (345,145 contracts):
Think about how well everything is going this year! The S&P500 is up almost 20%. Bonds are up 22% and even Gold is up 17%! Heck Bitcoin has more than doubled! Can things get any better than this???
This is a question I get a lot from friends and family or someone I just met that knows what I do for work.
What's funny is that they don't ask it quite like that. They won't ask, "JC how do I make money in the market?", even though that's what they really mean to say. It's usually more like, "Which pot stock do I buy?" or "Which Crypto Currency should I buy?", depending on where we are in the cycle. It's rarely an IF, and more of a Which One?
The way I see it, you can add the same amount of money every month for decades and just let it compound. If you're disciplined enough to do it (most of you aren't), I can see a good case for that strategy. But if you're looking to get into more specific trades or investments, I think a well-defined risk vs reward strategy is the only way to profit. If you can't manage risk responsibly you'll be gone soon.
