During last week's Conference Call we discussed a lot of the potential catalysts to drive Equities as an asset class higher over the intermediate/long-term, however, we continue to err on the cautious side given our outlook for sideways chop in the short-term.
Thursday I wrote about a growing number of potential "oopsies" (failed moves), so I want to follow up on that post and outline another group of charts that I think are suggesting short-term weakness in stocks.
Last week I had the pleasure of being on Real Vision TV where I recorded two segments, one on Bonds and Equities pairs trade (short EWJ/SPY).
The video to the Equities trade is here, but since I'm not sure if/when the free video about Bonds will be out I wanted to go through that trade for you all on the blog. And if the video does come out, I'll be sure to share it.
Going through charts and coming up with conclusions is not just something you do once. For this to work, Technical Analysis has to be a lifestyle. Getting away from the screen regularly and coming back open minded is part of that work / life balance. In this conversation I talk about some of the struggles I've had personally trying not to let the implications of us being right in our assessment impact my decision making. Thanks to Donnie Hensley and Speedtrader for being a part of Chart Summit 2019.
On this podcast episode, we're flipping the script a bit. I was invited to come on the DailyFX Podcast hosted by Tyler Yell last week, and I wanted to share that audio with you here today. In this conversation, we discuss the recent Chart Summit in Breckenridge, CO, how and why I started Allstarcharts.com and what trends I'm currently seeing in the market. One thing we also talked about was the benefits of journaling and writing ideas down on paper. I really enjoyed this conversation so thank you Tyler Yell and DailyFX for inviting me on.
If there is any group out there that is feeling the frustration, it's the gold bug community. Gold is at the same price today that it was a year ago, 5 years ago and 8 years ago. During that time frame, the S&P500 has more than doubled. The Dow Jones Industrial Average is up more that 14,000 points, again more than doubling during this period.
Even U.S. Treasury Bonds made money as interest rates collapsed. The bond ETF $TLT was up over 60% before retracing some of that over the past couple of years. But still, up substantially and clearly outperforming precious metals.
You could have literally been in anything other than these commodities and made money. But from epic frustration comes secular periods for profit. I think this is what we have here:
Tuesday we posted a mystery chart and asked you all to let us know what you would do. Buy, sell, or do nothing?
The majority of responses had a bearish bias, however, a few suggested buying the "failed breakdown" with a tight stop, and even fewer said wait it out. Both sides could prove to be right depending on the timeframe, but it's clear the mixed signals make it tough to have conviction.
Let's get into the real chart and why we feel it's relevant.
You guys who know me already know that this is my favorite exercise of them all. We only do this 12 times a year. Let's just say that it takes you an hour, if you really want to take your time, that's 12 hours of your entire year. Think about the amount of time you spend each year performing other analysis. As far as I'm concerned, it's not even close. These 6 hours (for me it's 6) are easily the most valuable 6 hours I spend all year analyzing markets.
This process allows us to take a step back, which forces us to identify the direction of the primary trend. It's impossible not to, especially when you're seeing similar themes across Indexes, sectors and asset classes.
However, in this post we're focused on the current mean reversion we're seeing in stocks around the globe and how to profit from it. We'll worry about later this year later this year.
I spent the New Year in Lake Tahoe, which is one of my favorite and most beautiful places in the world. Heading up to the lake with family and friends for a few days (and leaving my laptop at home) really helps clear my head and let's me focus on the environment we're currently living in. I see again and again people trying to compare today's market to "the average" of a dozen or so bear markets in the past. It's painful to watch.
It's hard to remember a time where I saw this much irresponsibility among investors, especially the pros who should know better. These "asset managers" are so busy dealing with investors, compliance, operations, marketing, regulations and whatever else they're busy doing, that they've completely underestimated the amount of risk in the stock market. It's like they forgot that risk is a real thing.
And what are they doing to justify their actions, or lack thereof? They're relying on a tiny sample size of prior market declines to "wait and see" what happens. They think they're "Portfolio Managers", but they should be "Risk Managers". There's a huge difference.
It's been a great couple of months for Bond bulls. As unprepared investors worry about their portfolios and financial media outlets irresponsibly call this market "crazy", we've been happy to watch the destruction of stocks and new flow of money into safer, fixed income assets. Interest rates have gotten slammed with stocks and bonds ripped. One for the good guys!
So the question now becomes, how low can rates go?