When we talk about the most important developments in the world today, we need to define who we are and why this is the case for us. We are market participants who have only one goal: to make money in the market. There are many others out there who are very loud, but are not here to make money in the market. Instead, they get paid to sell banner ads and tv commercials. This is the group that tends to lag price and prefers to focus on what is in the "news". Since price leads the news, these headlines and conversations typically show up well after the fact.

I think today we have a great example of this scenario and very clear conflict of interest.

The debate about whether Amazon is in the Technology Sector or the Consumer Discretionary sector is really a pointless one. It isn't anyone's opinion that Amazon is in the Consumer Discretionary Sector. Amazon IS in the Consumer Discretionary sector. In fact, it represents close to 11% of the S&P Consumer Discretionary Sector Index. Amazon could double tomorrow or go to zero and it will have no impact on the Technology sector. Do you know why? Because it's not in the technology sector. It's in Consumer Disctretionaries.

Anyway, the point is that Amazon has been carrying Discretionaries because of its enormous weighting. But take a look at what the Discretionary space looks like if you take this market-cap weighting out of the equation:

Contrary to popular belief, we're not here to be right. We're only here to make money. As market participants, we're not journalists or economists or side analysts. It's their job to be "right". So when they're wrong, they like to call it a "revision". But when we're wrong, it's called "a loss". See the difference? So since we actually put money to work and take real risk, we need to be responsible with how much risk we take. Therefore, we need to make sure that the potential reward far exceeds the amount of risk being taken at a given time.

Today we're looking at a good example of this favorable risk/reward scenario in a sector that I think gets crushed going forward:

When the major U.S. Stock market indexes are making new highs, you want to see the list of stocks making new highs increasing along the way as well. This had certainly been the case throughout February and March, but has come to a complete halt this month. Looking across the board, the S&P500, Dow Jones Industrial Average, Nasdaq 100, Russell 2000, Mid-cap 400, etc have all made new recovery highs over the past couple of weeks, since our epic bottom in late January/early February. The problem is that 1) all of our upside targets have now been achieved where we wanted to take profits and 2) breadth in the market now stinks.

I think a really important concept that too often gets overlooked is the power of keeping an open mind. Why must we stick to a bearish or bullish stance? What is wrong with neutral sometimes? Just because our upside get hit, does that mean we need to flip bearish and start shorting everything? I don't think so. I much prefer taking profits when objectives get achieved and then reevaluating once we get more price data. We don't know what is going to happen tomorrow or next week or next month. No one does. So let's appreciate the fact that the future is unknown and therefore all possibilities should be considered.

Today's Chart of the Week represents what I consider to be part of the bullish case for the S&P500 in 2016. I'm not ready to pound the table bullish, or bearish for that matter, but if this one plays out the way it looks, I would argue that it's a giant feather in the hat for the bulls. This is the mystery chart that I tweeted out yesterday, for those of you who have been asking.

We've had a heck of a rally in stocks over since late January, led by emerging markets, energy and metal stocks. Starting in mid-February the U.S. and other developed nations got the memo and started to play catch-up. We couldn't be happier with the performance of the stock market since then. But over the past couple of weeks all of our upside targets have been hit; all of the U.S. Indexes and sectors and about 90% of global indexes. So I've therefore been pretty neutral towards stocks since late last month, but I finally turned more bearish earlier this week.

Here is a market neutral trade that I think is definitely worth paying attention to. Whether you're bullish or bearish, this breakout is not something we should ignore:

We've just witnessed one of the most epic rallies in the stock market that we've seen in a long time. Remember, this has been dominated by global indexes, particularly Emerging Markets, not U.S. Stocks. We could not be happier to see this rally progress so well as we've been pounding the table to be long since late January. By mid-February, the U.S. and other developed markets put in their bottoms and started to play catch up to the rest of the world. But the underperformance of the U.S. has continued anyway.

Today's Chart Of The Week represents what could potentially be the start of a major structural improvement for U.S. Stocks:

One of the best ways to be positioned over the past 2 months has been to be in Emerging Markets, not in U.S. Stocks. I've been pounding the table on this trade since January and it has really worked out in our favor. The big question today is: Now What? Does this thing keep going, or does the longer-term trend of the U.S. outperforming Emerging Markets resume in the second quarter?

There are a lot of interesting things going on in the Crude Oil market these days from both a long-term and a short-term perspective. Premium Members of Allstarcharts have wanted to be long Crude Oil since mid-February when prices were able to get back above that key $29.60 level. Our short-term upside target was near $38 and this target is being hit this week. Nice little 30% rally. But moving forward, the implications of this short-term move now change the supply and demand dynamics in Crude Oil bigger picture.

With all of the bad news and negative sentiment surrounding the high yield bond market, I think this is a place where we want to be buyers, and no longer sellers. High yield bonds are just a fancy way to refer to "Junk bonds". At the end of the day, high yield is just that: high yield, because you're getting paid a higher return for the risk you're taking by owning junk. Both on their own and relative to the safe-haven U.S. Treasury Bonds, these things have been destroyed over the last few years.

Moving forward

This weekend I did my regular global macro review. This is when I go country by country analyzing the weekly and daily charts of all of the stock markets around the world. Each chart includes a momentum study (14-period RSI) and a 200 period moving average that we use to help with trend recognition. I trade indexes all over the world, simply because I can. Why wouldn't I?

In every market there are leaders and there are laggards. This is the case in both bull and bear markets. Regardless of the environment, some stocks and sectors will simply outperform others. Sometimes, this relative performance tells us a lot about the overall risk-appetite for institutional investors and in which direction they are headed.

Today's Chart Of The Week