In today's Chart of The Week we look at the ratio of Chinese Internet stocks relative to US stocks and why it's potentially pointing to outperformance in the months and quarters ahead.
This premium post will outline the stocks we like to take advantage of that thesis. If you've not read that post, I'd recommend you do so you have the proper context around these ideas.
Stocks are breaking out to new highs, however, not all areas of the market are participating to the same extent.
Today we're looking at a chart that suggests one market laggard is potentially undergoing a trend change and may outperform in the weeks and months ahead.
In this Episode of Allstarcharts Weekly, Steve and I talk about all of the new highs we're seeing on both Weekly and Monthly charts. We've been pointing to the improvements in market breadth in recent months and how we've been getting an expansion in positive participation, not a contraction. This week we started to finally see this work its way into the weekly and monthly charts, but that doesn't change anything we didn't already know. We continue with the breadth discussion by pointing out that the world doesn't start and end with the 52-week highs list. We're seeing breadth improvements in the 21-day high and 13-week high lists and I'm in the camp that we'll ultimately see that reflected on the 52-week high list as well. It's a process, remember:
In this episode of the Money Game Podcast Phil and I talk about the stock market making all-time highs while sentiment points to very few bulls. This is an interesting dynamic where the behavior of the market is pointing to one thing and the behavior and emotions of society are saying something different. I've been in the camp that this negative sentiment unwind is precisely the catalyst to take stocks much higher, not just in the U.S. but around the world. It's very rare to have stocks this strong, yet so few people betting on higher stock prices. It's pretty awesome. We also talk about the deterioration, or at least an end to the expansion we're seeing, in the upside participation in stocks. We're seeing MORE stocks, sectors and global indexes participating to the upside, not fewer. Until that stops, we want to keep looking for stocks to buy.
On October 26th I had the privilege of speaking at the Trade Ideas 2019 Summit in San Diego. It was a great opportunity to share our views, but more importantly, meet a ton of new people from all walks of life and hear their different perspectives. I had an absolute blast.
Last year JC presented at the same conference, outlining our very bearish thesis for Equities. This year my tone was the exact opposite!
I only had thirty minutes, but I ran through nearly 100 slides of Equities, Commodities, and Interest Rates, outlining our bull case for Equities.
The full video is available below and you can email info@allstarcharts.com if you'd like the full slide deck. Hope you enjoy!
Going through charts this weekend, there are a few things that stood out.
First of all, the biggest company in the world is on pace to easily double in value in 2019. How do you think things are going around here? My bet is pretty darn good:
What do we know about all-time highs? They are not a characteristic of a downtrend. New all-time highs are things we see when we're in a market environment where it is more advantageous to be buying stocks rather them selling them. This is what we have today, whether you like it or not.
The market doesn't care that you don't like the president. The market doesn't care that you think this is only because of buybacks. The market doesn't care that you think this is fed driven. THE MARKET DOES NOT CARE WHAT YOU THINK ABOUT ANYTHING.
EVER.
Anyway, on Halloween we got new all-time monthly closing highs in the S&P500, Dow Jones Industrial Average, Global 100 Index, Nasdaq Composite, Nasdaq 100, S&P 1500, Dow Jones Composite Average, Consumer Discretionary Index, Technology Index, Semiconductor Index, US Real Estate Index, J.P. Morgan Chase, Microsoft, Apple, Google, the Europe Hedged Index Fund and Brazil's Bovespa, among many others.
Are these reasons to now all of a sudden start selling stocks? My argument is no.
This is a lesson I had to learn the hard way for sure. Early in my career I used to always want to be trading the Russell 2000 or the Nasdaq and sometimes even S&P futures. Some people can do this successfully. Most cannot.
A wise Egyptian man once taught me that, If you trade the Averages, You'll Get Average Returns. This made a lot of sense to me when he first said it, because I didn't have great experiences with that strategy up until that point.
The reason I bring this up today is NOT to convince you not to trade the index ETFs or Futures. You do what you have to do! The point of this post is as a reminder that we use Technical Analysis to identify trends. These trends are in all asset classes - Stocks, Bonds, Commodities, Currencies, Interemarket relationships, Crypto and others. Once we identify the trend, then we can figure out the best way to try to profit from its theme of rising or falling prices.
Saturday I spoke at the Trade Ideas Summit in San Diego, outlining our bullish case for US Equities. It was a lot of fun and you can register here to receive the presentation replay when it becomes available.
In honor of the new all-time closing highs in the Russell 3000, S&P 500, and Nasdaq 100, I want to outline several stocks we want to be buying to take advantage of our bullish Equities thesis.
For those who didn't check the market today, here's the Russell 3000 making a new all-time closing high, just shy of its former intra-day high of 178. New highs are not a characteristic of a downtrend, so as long as prices are pressing above 178 our upside target is 196 in the coming months.
We've done the homework. New All-time highs are NOT a characteristic of a downtrend. Go back and check for yourself. I was just listening to the great Brooklyn poet Shawn Carter who inspired the headline. It's true. This is not a bear market, by definition. So should we be looking for stocks to sell or should we be looking for stocks to buy?
