JC, What do you mean rotation into the Dow Jones Industrial Average?
This is a bubble!
It can't possibly be the beginning of the Dow's move.
Wait, can it?
Well, despite all the hype about a bubble and the ridiculous rhetoric about a dislocation between wall street and main street, the Dow Jones Industrial Average hasn't really done much the past 10 weeks. It hasn't made much progress at all, even if you include the past 2 weeks of gains. In fact, the last 2 weeks are all the gains since early June.
Meanwhile, the Dow Jones Transportation average has been the leader and broke out above those former June highs a while ago:
Welcome to this week's edition of "Under The Hood."
What we do is analyze the most popular stocks over the trailing week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We have some new additions coming for how we generate the list of most popular names, which we'll explain more each week as we add new data sets. There are so many new data sources popping up that all we need to do is organize them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
The S&P 500 finally achieved new highs this week. The market is clicking on all cylinders as breadth and participation continues to broaden, and favorable risk/reward setups are popping up all over the place. Let's dive into the most popular tickers this week and see what's going on "under the hood" in these hot names.
This week on Happy Hour with Traders, I brought together some of the best minds when it comes to stock market breadth. You see all the breadth charts on twitter and you always hear debate about whether market breadth is weakening or improving. I think this round table discussion clears up a lot of misconceptions about the subject. I think it also gave each of us new ideas about how to approach the market from a weight-of-the-evidence perspective. I know I definitely got some new ideas that I want to start to do some more work on.
This is why we have these conversions. I'm fortunate to have really smart friends around the world that all view markets in their own unique ways. So I'm going to try my best to show them off so you can learn from them too!
Here's the latest Happy Hour with special guests Andrew Thrasher, Willie Delwiche, Mike Hurley and Steve Strazza. Enjoy!
The Fixed Income, Commodity, and Currency markets are near and dear to my heart. Ever since I began learning Technical Analysis, I've always loved analyzing things that are "off the beaten path." This included everything from Interest Rates to Soybeans to the Norwegian Krone. Equities are great and all, but this is the stuff that gets me up in the morning.
In addition to the blog posts we do on the site, I've wanted to explore new ways to share that passion with you all and show why even if you're not investing in these markets directly, they're worth paying attention to.
That brings us to my weekly show, "What The FICC?"
In this weekly video series, I'll be highlighting the most important chart or theme from these three asset classes while doing my best to tie that analysis back to Equities through an intermarket signal or a trade idea.
Thanks to everyone who responded to this week's Mystery Chart. Responses were somewhat mixed. It was a daily chart of the iShares Medical Devices ETF $IHI.
What we really wanted to know is whether or not investors are buying these kinds of bullish continuation patterns right now. Many alluded to the underlying trend being higher but still wanted to wait for the flag pattern to resolve before taking action.
This is a prudent approach and we're looking at the chart in a similar light. With that said, we're also viewing setups like this within the context of what is going on in other areas of the market. In other words, as more and more of these patterns resolve to the upside, which they are, the higher the likelihood is that others will follow their course.
In this post, we'll walk through our top-down approach to highlight why we like Medical Devices right now and then drill into some of our favorite setups as a way to express our bullish thesis.
One of the reasons we've remained so bullish on Equities as an asset class is because of the continued expansion in the number of stocks participating to the upside.
In this week's "Chart Of The Week," we want to highlight a simple metric that can be used to identify the breath of the Indian stock market.
Traders often joke that there's support at Zero. And then Crude Oil Futures traded negative and we threw everything we thought we knew out the window. Where was that in your model?
Anyway, this is the first thing that comes to mind when I think of the garbage that is, GE.
Next to Wells Fargo, this might be one of the worst companies on earth. It may actually be somehow worse. And by company, I don't care what's going on behind the scenes or who works there. I'm referring specifically to the stock, which is all that matters to us.
We're looking at 2 plots, the price itself going back several decades, and the relative strength (or weakness, in this case), compared to the S&P500. Notice how after the peak in 2000, the next 2 peaks (where US Stocks moved on to new all-time highs), $GE put in lower highs. Also look at the relative strength line breaking to all-time lows:
Everything in life is relative. In markets, it works the same way.
"How could someone possibly want to own these bonds that pay negative yields"?
Well, what's the alternative? Crashing stocks? Collapsing energy commodities? It's all relative.
In my experience, when assets are in strong uptrends, some might call those "bull markets", they don't just do well on an absolute basis, but they also tend to outperform their alternatives. In the case of stocks, you have Bonds and Gold that are two other very popular places to allocate capital.
The Chart of the Week has to be the Nasdaq 100 breaking out of a multi-year base relative to US Treasury Bonds (Blue Line). I also included the Nasdaq relative to Gold, which has yet to complete this basing period (Black Line):
The Top/Down approach to markets is at the core of what we do at All Star Charts. That means starting at the asset class level and peeling back each layer to refine our view of the smaller components that make up that asset class. With each new layer, we discover information that helps us form our weight of the evidence conclusion.
That brings us to our new weekly column, The Top/Down Take, where we hope to educate readers on how we execute this process and highlight its value through the analysis of popular stocks.
