In addition to the updates we've done about the broader market here, here, here, and here, a lot of you have been emailing us asking for more individual trade ideas. Given that we have to be a lot more selective in this environment, I'm going to use this post to outline a number of setups on the long side. The posts linked above explain why we have a long bias.
In July I looked at the trend and momentum readings of stock markets around the world and US Sectors and Sub-Sectors to identify the overall risk appetite for Equities. Today's update will perform the same exercise and compare the results to determine if breadth has improved, deteriorated, or stayed the same, as well as what the implications of these changes are.
In July I looked at the trend and momentum readings of stock markets around the world and India's Sectors to identify the overall risk appetite for Equities. Today's update will perform the same exercise and compare the results to determine if breadth has improved, deteriorated, or stayed the same, as well as what the implications of these changes are.
Since we launched Allstarcharts Indiain January, we've seen great traction and have gotten a lot of feedback and suggestions from our readers and subscribers. In fact, many of the ideas we've added to the platform and are currently working on have started from conversations with you all.
A major part of the thesis for higher prices in Canada was the breakout in Financials (and REITS) which represent roughly a third of the TSX Composite, however, over the last few weeks we've seen failed breakouts in many of these leading stocks.
In this post I'll highlight some charts identified during my Chartbook update that describe the type of environment we're in for Canadian stocks and why a more neutral stance appears appropriate. Given the correlation between equity markets around the world, I'd also encourage you to read some of our other free pieces about the US here, here, here, and here.
After last week's move to the downside I figured there would be a lot of changes to the IBD 50, and there were, so I want to highlight the characteristics of some names that continue to hold up well.
Some of you guys have been reading my work for over a decade. But I understand there are many newer readers, so I think it's important to address what's going on here. I've been called a Permabull many times for over 2 years now, meaning that they believed I just always had a bullish bias towards stocks. The truth is that while so many were eager to pick a top during this entire rally, I was consistently bullish because the weight of the evidence pointed that way. This is no longer the case and our approach has had to adapt over the past week to a new environment.
We're fortunate to have been accurate with our risk levels. As soon as Small-caps broke 169, things got bad. There was no reason to be in them for us if we were below that in $IWM. Large-caps broke our levels early this week and things got progressively worse after our prices were breached. That is why we set them. That's the good news. The bad news is that I'm confident this is just the beginning.
Is this 2008 all over again? 1987? 1929? I doubt it.
We're not seeing any stress in credit, which is where the real problems start. In fact, some stocks and sectors are going up while others are going down. We've seen relative strength in Energy, Utilities and Consumer Staples. Remember, the Dow Jones Industrial Average closed at a new all-time high just last week. It's easy to forget right?
So what's the problem? The problem is that we have failed breakouts in all of the major U.S. Indexes, and at the very least, it is going to take some time to resolve. The questions are: How long? and How low could we go?
It's not just the U.S. that is breaking our important levels, stock market indexes all over the world are reacting to the volatility. Europe is flirting with dangerous areas but Brazil and Russia have bucked the trend, likely due to their exposure to Energy. Other countries like India and Tech based markets have been the ones coming off the most in the emerging group.
That's the question we always want to ask ourselves.
I get asked all the time, "Hey JC, I own this stock, it's down x amount and I'm not sure what to do?". Man if I had a bitcoin for every time I got asked that one.
To me the answer is very simple. If you woke up that morning and you could do anything you wanted with that money, anywhere in the world, with any asset class, is that stock what you would buy?
If the answer is no, then you know your answer. Go buy whatever you want to buy. Transaction costs are nothing these days, so the pennies on that are no excuse to sit in something costing you way more.
We've been bullish $CSX all year. And we had a successful options play this summer that recently came to a profitable conclusion. JC calls CSX "a beast!" I can't argue with that.
And low and behold, even as the overall market has hit a little bump in the road over the past week, $CSX just continues riding the rails, appearing to be in the final stages of completing a nice and tidy two-month base with eyes on a $91 price target and above.
With earnings on deck, the chairs are aligned for an opportunistic play to put elevated options volatility to work for us.