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?

This is one of my favorite things to do: Forget everything that happened this quarter and this year and start from scratch. It doesn't matter what we did or how we felt in 2018. It's irrelevant. We're moving forward. This is my Q1 2019 Playbook.

While we couldn't be happier that U.S. stocks got destroyed this quarter, let's not forget about all of the other markets out there. US Treasury Bonds have had a very nice rally during this stock market correction, which is another move we're ecstatic about. And Gold and Silver have started to make moves to the upside as well, which is something we haven't seen in what feels like forever.

But today, it's the US Dollar that I think stands out and the recent move lower could just be the beginning. 

There are just a few days left in 2018 and it's tempting to make some last minute moves to improve your annual results in the old portfolio. But is it a good idea?

This is obviously not my first 'last few days of the year' experience as an active market participant. I know the feeling, trust me. I've made the mistakes. I've gotten cute. I've overextended myself in late December for absolutely no reason. It's those scars that I keep with me after all these years that remind me not to do it. It's like a kid with a hot stove. After he gets burned once, he won't ever make that mistake again!

The financial media loves to make you feel stupid for missing out on certain moves. Your friends and neighbors like to remind you about how well their portfolio is doing and all of their brilliant investments. It's easy to get caught up in this nonsense.

I like to observe. It's amazing how much you can learn if you just shut the F&$% up and pay attention. What are the most successful investors doing this time of the year? Are they pressing their trades and initiating new ones? Or are they spending time with their friends and family? Are they running office...

From the desk of Tom Bruni @BruniCharting

From a public markets perspective the Marijuana Industry is small, so small that it could go to zero tomorrow and nobody would notice. In late August we started covering the space after receiving a lot of reader requests, so as we close out 2018 I wanted to share one chart that perfectly summarizes the boom and bust it's witnessed over the last two quarters.

U.S. Stock Markets will only be open for a half day tomorrow Monday December 24th for Christmas Eve and closed on Christmas Day. And the following week will follow a similar pattern, being completely closed on Tuesday, January 1.

And the muck in between is no-man's land, especially given the market we're current in as best described by our pal Howard Lindzon: "This is one shitty market."

Unless you've got positions in distress that need defending in this sloppy, bearish tape, it's best to sit on the sidelines and wait until Wall Street gets back to work for real after New Year's Day. As such, we will not be adding any new positions to the All Star Options portfolio this week.

We're fortunate

From the desk of Tom Bruni @BruniCharting

In this post I want to share two charts from the weekend update of our Market Internals workbook, both of which confirm the continued deterioration in breadth as US Stocks make new lows.

Somewhere along the way, a large majority of U.S. citizens convinced themselves that the market owes them something. They think that if they "invest" in the stock market, that they've somehow earned the right to make money over time. I'm not sure if it's the financial advisors feeding them self-serving garbage based on their tiny sample sizes. It could possibly be the financial media constantly making their viewers feel stupid for missing out on a trade or a long-term trend. These vultures use headlines like, "If you had invested $10,000 in X on this specific date you would have easily earned Y in that short period of time". They're proving to us how worthless they are. It's poison.

At what point do investors hold themselves accountable? It's never their fault for losing money. It's the Fed's fault, it's the Trump's fault, it's my neighbors fault who "made" me buy bitcoin.

It's YOUR fault if you lose money. We have no one to blame but ourselves if our "investment" account loses 10%, 20%, 50% or even much worse in the case of things like crypto currencies, precious metals or recent IPOs like Snapchat. 

From the desk of Tom Bruni @BruniCharting

Yesterday after the bell we sent out our Year End '18 ETF Risk Update to our Institutional Clients, covering 100+ of the most actionable and informative charts. To put this report together we examined over 500 inter-market and cross-asset relationships across weekly & daily time-frames to identify trend direction, momentum, risk-management levels, and prices targets.

In this premium post I want to highlight a few charts from each of our five sections: Factors, International, Domestic, Fixed-Income, and Thematic/Niche. If you like what you see and want the full report, you can fill out our Institutional Client Application or contact our Head of Institutional Sales, Jonathan Bloom, for access.

Without further adieu, let's look at some charts.

The market is a beautiful thing, particularly the analysis of supply and demand behavior. I'm incredibly fortunate to be a practicing Technician for almost a decade and a half and have become good friends with some of the best that ever did it. I will never take that for granted.

These relationships are part of the reason I started a podcast on Technical Analysis Radio, which is now almost 40 episodes deep. Before the podcast, I started hosting the annual Chart Summit, which was the very first 100% virtual Technical Analysis conference. Market participants all over the world were able to tune in the past 2 years from the comfort of their own homes and watch some of the best Technicians in the world discuss their process and apply them to real time market behavior. I was in Hong Kong last year and someone stopped me and told me they skipped the Chinese New Year celebration in order to watch the Chart Summit. This is the type of feedback we've been getting. You can still go back and watch all...

Bonds funds did a good job of getting everyone on the boat leaning one way, only to reverse and slam them in the other direction. The whole world seems to think interest rates have no where to go but up. However, those of us who follow the price of bonds know that reality has been sending us a different message.

The recent failed breakdown in $TLT (the 20-year bonds ETF) is a perfect example

Having Trading Psychologist Dr. Brett Steenbarger on the podcast was a huge treat for me. He works with the best traders on planet earth on a daily basis. Needless to say, when Dr. Brett is telling me something, I want to listen. In this episode, he let me ask him all the questions I was curious about and he happily answered them all with solid advice and relevant anecdotes. We make a lot of mistakes as investors because of our many flaws as humans. When our stress levels are elevated we start acting emotionally, instead of rationally. Taking losses is a difficult task for us, even though we all know that losses are part of the deal. I really enjoyed this conversation and it could have gone on forever if I didn't end it. I hope you get as much value from this chat as I did.

Bonds Funds are breaking out to new 3-month highs. This comes after consensus this September was for higher US rates, and therefore, lower prices for bonds. When the market is leaning too much in any one direction, the unwind of that extreme positioning can be intense. That's what I believe has been happening throughout the 4th quarter.

Here are two charts that show rates could continue lower for some time. The first is a long-term chart of the US 10-year Yield failing to break out above the downtrend in place since 1981:

Coming down the homestretch of 2018 and Mother Market sure is making it interesting. Will a "Santa Claus" rally save global stocks? Or is the Grinch quietly whispering in her ear?

Speaking of the Grinch and classic holiday movies, my family's Netflix consumption has been on the rise this holiday season. But as we know, the stock market is a forward looking mechanism and the outlook as foretold by prices is suggesting that softness is ahead for $NFLX stock.

This being the holiday season and all, you'd be forgiven if you didn't want to put on any new risk heading into the New Year. But for those of us still standing in the ring ready to do battle, $NFLX is streaming a tasty short play opportunity.

These are the registration details for our live monthly conference call for Premium Members of All Star Charts India.

This month’s Conference Call will be held on Tuesday December 22nd at 7PM IST. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since our launch.

Here are the details for Tuesday:

This week I'm thrilled to have David Keller on the podcast. He is a former President of the CMT Association and spent a long time at Fidelity, and Bloomberg before that. In this episode, the current Chief Strategist at Sierra Alpha walks us through why is approaching the U.S. stock market from a more neutral perspective. We discuss US Treasury Bonds, Rates, Gold, Crude Oil and other assets that are making new highs like Palladium. I really enjoyed this conversation, especially how David compares trading to risk management as a pilot. He likes to fly planes when he's not looking at charts. This was a fun chat.

From where I sit, the correction in banks is a long way from being resolved, and one of the biggest names in the biz appears to be teetering on the edge of a much more significant drop than already experienced. It's now down for the year and significantly below both 50- and 200-day moving averages.

So far in the early stages of this market correction (dare I say Bear Market? Too Soon?), I've been aggressively deploying Bear Call Spreads to attack bearish trading opportunities.

Bear Call Spreads are a version of a vertical spread that consist of a short call at or slightly out-of-the-money and a long call further out-of-the-money. The profit profile of bear call spreads typically maps out like this:

There is a reason we look at the stock market from a global perspective. It's because we invest in a global market. Stocks in America weren't going up the past couple of years because of what was happening in DC or New York. Stocks in the U.S. were going up because stocks all over the world were going up.

That changed earlier this year. While U.S. stocks keep making new highs through the Summer, global markets were not participating.

The question was simple: Were we going to get rotation back into Emerging Markets, Europe and other under performing areas around the world? Or was the U.S. just the last man standing and would catch down to the rest of the world. It's clearly been the latter as stocks have come off significantly this Fall.

For clues about what we should expect in U.S. stocks, I think it's important to continue to value the data coming in from global indexes. 

Some stocks are going up and most stocks are going down. That's been the trend over the past 10 weeks or so. There is nothing out of the ordinary about that and cash heavy positions have helped us tremendously during this period.

As far as the indexes themselves are concerned, I think it's obvious that they're a mess. You've heard me say it a thousand times, "If you trade the averages you'll get average returns". It's something I learned the hard way a long time ago. Focusing on individual stocks, both long and short in this environment continues to make the most sense based on the weight-of-the-evidence.

First we'll look at the stocks that remain weak. We want to keep selling those if they're below key levels. From the long side, it's hard to ignore some of the relative strength out there. If the market catches a bid, those are likely to be the ones that lead us higher.

I'm not going to sugar coat it. There are numerous stocks and sectors that are hanging on the precipice that look like a small push could send their shares tumbling into a deep abyss. The Regional Banking Sector is one of these sectors. A quick scan across the landscape reveals a tornado of broken charts. And as one would expect, volatility is elevated across the board here and offers great edge to net options sellers. 

A retail stock which earlier this year showed tremendous promise breaking out of a FIFTEEN YEAR base has faltered. And any regular reader of All Star Charts knows we're fans of the, "from failed moves come fast moves" phenomenon. In short, if a stock breaks out of an obvious pattern, sucks everyone in, then can't hold its breakout and reverses? Well, oftentimes the moves in the opposite direction can be doubly vicious.

The stock we've identified has reversed hard off all-time highs over the past four weeks, but it looks like the bad news may only be getting started. Friday's close left the stock's chart hanging on a precipice. We're thinking we'd like to give it a little nudge and see how hard it will fall.