People don't like it when I tell them we're near the beginning of a new bull market in stocks. For some reason, they prefer that cozy feeling of going to bed thinking stocks are near an important high, and they've somehow outsmarted the system by selling stocks in uptrends instead of buying them.
I'm convinced some of these people must be looking at their charts upside down.
Anyway, let's take a look at the markets so I can show you why I think we're closer to the beginning of a new bull market and not near the end of an old one:
Mobile Payment stocks have been a key part of our focus on the Technology theme taking place across various sectors of the market.
Since the summer the space has cooled off a bit but is back at levels where it would make sense for the trend to reaccelerate to the upside.
Here's the Mobile Payments ETF vs S&P 500 ratio (IPAY/SPY) pulling back to trendline support. This looks like a normal pullback within a long-term uptrend, however, our concern is that momentum got oversold for the first time since mid-2016.
The strongest uptrends do not get oversold, but unfortunately, this one has so we need to watch if prices bounce from this level and resume their uptrend (preferably getting overbought once again) or if they roll over through support and make fresh lows.
Copper has been getting a lot of attention as it hits 5-month highs, but there is another Base Metal chart that's not being talked about.
Today we're looking at that chart and then taking a more comprehensive approach at what's going on in the space.
Here's Copper making 5-month highs as momentum attempts to get overbought. The record net long position held by commercial hedgers continues, suggesting they think Copper prices can still head higher despite a more than 10% rally from the July failed breakdown.
Click on chart to enlarge view.
Stronger Copper is a good thing for Emerging Markets and reflects market participants pricing in stronger economic growth conditions.
It's been about 4 months since our last Canada update and many of the trades we outlined there have run their course, so today I want to look at 3 stocks with a common catalyst to spark their next move higher.
With that being said, today's focus is on one sector and its largest component, both of which look vulnerable to further downside.
Let's take a look.
One of the tools we use for Indian stocks due to how top-heavy the market is are chart overlays of a sector/index's largest component and the underlying sector/index. The largest component in most cases can represent a major portion of an index and act as either a helium balloon or lead balloon, pulling the index up or down on a whim. When their performance diverges, that's when we want to pay attention.
Over the last few months, we've seen a divergence in the performance of Vedanta Ltd. which represents 19% of the Nifty Metal Index. Vedanta is making lower highs as the sector makes higher highs, suggesting that potential weakness could be ahead the group as a whole.
In this Episode of Allstarcharts Weekly, Steve and I discuss the less talked about tenets of Dow Theory. Everyone always likes to talk about the Dow Jones Industrial Average either confirming or diverging from the Dow Jones Transportation Average. But what gets forgotten is that there are many more tenets like Closing Prices are the most important, Identifying the direction of the Primary Trends and The Market Discounting Everything. Check out JC's 5 Most Important Dow Theory Tenets
This day and age we have other areas just as important, or even more important, than a group of Railroads, like what Charlie had when he first wrote down his Tenets in the late 1800s. Today we also compare the Dow Jones Industrial Average to the Semiconductor and Homebuilders Indexes as well as incorporate a series of ratios with Consumer Staples and Financials. It's more of an "and" than an "or" for us when it comes to Dow Theory.
Healthcare is the latest of the American Sectors to break out to new all-time highs. I think Financials are next, but for today's conversation, let's focus on the task at hand: Healthcare is a space we want to own.
First of all, here is that breakout. It rarely gets cleaner than this:
Click on Charts to Zoom In
Another 35% of upside in this sector would be consistent with historical moves in the past and would be perfectly normal, as far as I'm concerned.
The bigger question, really, is which industry group is going to be the main driver?
The obvious choice appears to be Medical Devices. When all these stocks and sectors were churning sideways since early 2018, the relative strength was already here. You can't deny that. Look at this beauty:
Did you notice that the U.S. Financials Sector Index is just 3.5% away from its infamous all-time highs in 2007 before the financial crisis?
That's right, $XLF is approaching this level once again, for the 3rd time in almost 13 years. Is this finally going to be it? Are we really going to start a new bull market in Financials?
I think yes and I'm going to tell you why.
First here is the chart I'm referring to and its 3rd attempt to get through this level:
You can also watch this entire video for just $1 by clicking this link. In this short clip below, I show you 3 specific points throughout the presentation where
1) I discuss risk management techniques and how we will know soon if we're wrong on our thesis,
2) a specific ratio that is a coincident and, often times, a leading indicator for US Stocks, and
3) how we identify specific trade ideas using the top/down approach, with 2 ideas in particular that we want to take advantage of today.
Our conclusion then was to be avoiding the sector on the long side and that its weakness was a drag on the broader market given its 10% weighting in the Nifty 500.
Today, not much has changed, in fact, it's arguably getting worse.
