I want to make something perfectly clear: Semiconductors breaking out of a 6 month base to new all-time highs is historically not a characteristic of a downtrend for semi's, tech, or US Stocks as an asset class. These are facts. As go Chip stocks, so goes Tech. And in case you forgot, Technology is a quarter of the entire S&P500.

Feel free to argue against me on this. You'll lose. Semiconductors going up is NOT bearish for stocks. In fact, I can think of few things more bullish.

Here is a Monthly Chart of the PHLX Semiconductor Index $SOX breaking out to new all-time highs:

In our last Chart of The Week, we took a look at Pharmaceuticals to identify opportunities on the short side of that sector.

Today we're taking a step back and at the performance of Emerging Market equities as an asset class.

Stocks in the U.S. Financials Sector have been underperforming since the beginning of 2018. If you recall, that is precisely when the majority of stocks around the world stopped going up. It's been a sideways grind for many stocks and sectors since then and a solid downtrend for many more, like small-caps, emerging markets and certainly financials, particularly on a relative basis.

A funny thing happened last week, however, while the gossip columns were filled with impeachment talk and upcoming recessions: Financials broke out to new multi-month highs relative to the S&P500. But not a whisper about it anywhere. I like that!

From the desk of Tom Bruni @BruniCharting

Technology is the largest sector of the market from an indexing perspective, but it's also pervasive because it finds its ways into other sectors/industries and often plays a big role.

With that as our backdrop, it's clear why Technology's relative performance is an important barometer for the health of the market...and it's been quite good since breaking out to new highs in 2016.

So can it continue, or are we due for some TECHnical difficulties in the weeks and months ahead?

The mean reversion we outlined a few weeks ago has been playing out, but now the major indices are running into sellers at very logical levels.

With that said, one area looks particularly vulnerable at current levels, Pharma.

From the desk of Tom Bruni @BruniCharting

We look at a lot of charts every week, so it's not surprising that we often come across charts that look "too simple."

A setup we've seen thousands of times or a trend that's reaffirmed itself time and time again, yet I always find myself being skeptical of a chart that looks textbook in nature.

Today I want to take a look at one of those charts.

From the desk of Tom Bruni @BruniCharting

There are a lot of messy charts out there, but we've been discussing the importance of having a global perspective and using weekly/monthly charts to stay focused on structural trends as opposed to the day to day noise/chop we've been experiencing.

Today we want to look at an area showing relative strength that's still offering opportunities for those who need to put cash to work.

When I go through my charts, I see all kinds of different trends, patterns and consolidations around the world. It really depends on what I'm looking at. However, one area that has been a consistent outperformer is in Medical Device stocks. The way I see it, these are just Tech stocks stuck in the bodies of Healthcare names. So our theme of "bullish tech" makes sense, even though on paper they're Healthcare stocks. 

Here is a chart of the Medical Device & Equipment Index $IHI relative to the S&P500. This one goes from the lower left to the upper right. We call those Uptrends:

The major indices in India are stuck in "no man's land" right now, making it a tough trading environment for many.

In this post, we're going to take a quick look at what that means and how we're approaching it.

From the desk of Tom Bruni @BruniCharting

This week I've seen a chart of High Yield relative to Investment Grade Bonds floating around with various conclusions, but I wanted to use this to highlight some things to consider when using Bond ETFs as a proxy for what's happening in the market it's meant to track.

Assets in the strongest uptrends not only do well on an absolute basis, they tend to outperform relative to their alternatives as well. In the case of the S&P500, with new all-time highs last month, we've just seen lower highs relative to both Gold and US Treasury Bonds. This is NOT evidence of a strong uptrend.

The question today seems clear to me: Is the underperformance of stocks relative to other assets "The Divergence" that we'll point to in the future as the heads up that something was changing? Or will we get relative rotation back into equities and this was just a temporary blip while stocks consolidated their massive 2016-2017 gains?

One of the most important concepts we talk about in Technical Analysis is confirmation.

Whatever thesis we have, we need price to confirm it before we can act...and if it doesn't then we need to respect that and get out of the way.

Risk management is our main priority and two simple charts do a great job of highlighting why we wait for confirmation.