There has been a lot of risk in the stock market over the past 2 months and that still has not changed. Things are getting worse, not better. I tried to emphasize in this week's Live Call that we have NOT seen any evidence to suggest that the worst of the selling is behind us.
We've been inundated with emails from Financial Advisors and traders all over the world. From New York to London, South Africa, Malaysia, Laguna Beach they keep coming in. We work really hard and it is so nice to see how much we've been able to help people, both pros and every day hard working individuals. Thank you from all of us at Allstarcharts! We don't take these notes for granted even for a second.
We know times are tough for some people right now. I have friends and family that lost their jobs today. I'm seeing it outside of markets.
Every month I host a Conference Call for members of All Star Charts Pro. From the feedback we get from our readers all over the world, this one feature of our Membership is a fan favorite.
A lot has happened in the past month. You hear things about interest rates getting slashed to zero, viruses impacting stocks all over the world and many things that none of us could have predicted a month ago. However, Technical Analysis gave us the ability to get out of the way and avoid this entire mess. Not only did we want to buy bonds, but we simultaneously wanted to sell stocks!
Today I want to share with you the video of last month's Live Conference Call. I've unlocked it so anyone can watch it, not just Premium Members. I've gotten a lot of requests to do this, even from paid subscribers, because opening it up serves as a great educational resource for the future. We can all learn from this, myself included.
We got a lower low in equities, followed by continued weakness rather than stabilization. Heavy cash positions and a defensive posture remains best in this historically volatile environment.
Given how quickly things are moving, there are three charts on our screen that will help identify when a shift in the market is occuring.
We had a few buyers but most of you were selling at this logical level of interest or exercising patience to see how prices react here. A few responses also pointed out that this likely isn't the best time to enter on the long side but are anticipating an eventual breakout and would be buyers if and when we get it.
This is the same camp we'd fall into and we provide details why in the original Mystery Chart post. With that as our backdrop, let's look at the chart.
We look at a variety of intermarket ratios that span just about every asset class in order to get a read on interest rates. Here is one that we don't discuss too often, but its relationship with the 10-Year Yield is obvious from looking at the chart below.
The S&P High Beta/S&P Low Volatility (SPHB/SPLV) ratio made significant lows around the same time and place as the 10-Year has several times over the past decade.
This is the big question going through the minds of market participants all over the world right now. What's next? Have we seen the worst of it? Or is this just the eye of the storm?
I remember as a kid I was 10 years old when a huge storm hit Miami. Hurricane Andrew was a massive category 5 storm that was supposed to hit Orlando but in the middle of the night changed directions and decided to make a beeline towards my house. So the eye of the storm actually went over our heads:
We've been very clear about how we wanted to avoid owning stocks this month. Fortunately, bonds have been the beneficiaries of the relentless selling in these stocks. Nothing has changed for the positive. But it's actually some former leaders completely falling apart that now has my attention.
Remember when Industrials broke out to new all-time highs? We said that as long as that was the case, how bad could things be? Well, Industrials are no longer above those former highs and actually just broke down to new 10-year relative lows. This is behavior consistent with an environment where we want to be selling stocks, not buying them:
