Over the last two months the Rupee has rallied against several of the most widely traded currencies in the world, including the US Dollar, Euro, British Pound, Yen, and Australian Dollar. With that said, the Rupee's rally versus the US Dollar was short lived and the pair is now back toward 2.5-year lows, suggesting it remains vulnerable and that further weakness may be ahead.

From the desk of Tom Bruni @BruniCharting

Dollar strength has wreaked havoc on the group of ETFs that many people use to gain exposure to global equity markets. One downside of many of these ETFs is that they own the assets of the country they represent in their local currency, and since the vehicle is unhedged, changes in the exchange rate play an important role in their pricing. The Dollar Index has rallied roughly 8% since its February lows, and more dramatically against many emerging and developed market currencies not represented in the Dollar Index, which has exacerbated many of the price declines we've seen in this group of stocks.

AMD has had a tremendous run off this April's lows, where it bottomed out around $9.00. Today, it's trading north of $16. That's a greater than 75% move in about 11 weeks. Wow.

But we have some very important technical and supply-and-demand reasons to believe the move might only just be getting underway. And we want to participate, but limit our risk in doing so.

From the desk of Tom Bruni @BruniCharting

In early April I tweeted about AMD's potential breakdown from its 15-month bull-flag and its potential implications for the stock. In hindsight I'm glad I did because it's great to have this real-time example of my mindset, and the mindset of others in the marketplace, as the pattern played out. It was also a great opportunity to get constructive feedback in the comments section from many of the bulls at the time. Now that I've used my one joke per post allowance, let's move onto how the stock has performed since.

The Nifty Energy Index is hitting 2.5-month highs relative to the Nifty 500, lead by Reliance Industries Ltd. which makes up 50% of the index and is making all-time highs. With a component making up that large a percentage of the index, it's inevitable that strength, or in this case weakness, of the other holdings may be masked by the overbearing influence of one stock.

Google is making a run at a big fat round number - 1200 -- which would also be a new all-time high, and time is of the essence to get aboard what could be a rocket ship ride much, much higher. We don't have much time to waste so I'll just cut right to it.

The roughly 15% rally in the Nifty Pharma Index that's occurred over the last four weeks has a lot of people asking "was that the bottom?". In an attempt to answer that question I'll be looking not only at the index itself, but at its 10 components as well.

Before we get into that though, I think it's important to understand how this index is constructed. Despite there being 35 pharmaceutical stocks in the Nifty 500, the Nifty Pharma Index only has ten stocks in it that make up roughly 80% of the industry's market capitalization. Situations like this are why we use equal-weighted indexes to get a better idea of what stocks in this industry are doing, as only looking at the cap-weighted index which is dominated by large-caps can mask the positive or negative relative performance of its mid and small-cap companies.

But today we're talking about the cap-weighted index performance, so let's get right into it.

So JC calls me up today and drops this in my lap on Deutsche Bank $DB:

I think this is it. I think the bottom is in. Either that or it's a zero.

LOL.

More professionally, JC is quoted in Barron's:

When you talk about the fundamentals of these banks, then people get really scared, but there comes a certain point where that horribleness gets priced in.

I'm rarely, if ever, a bottom-feeder in the stock market. But knowing that $DB is just too big of a name to allow to go bust (I think regulators learned their lesson with Lehman Brothers?), it seems like a low-risk, potentially high reward play to dip our toes in the water in a risk-defined play to participate in a rebound.

Sector rotation has been a hot topic as this bull market keeps finding fresh legs to pull us higher. As we scan the entire marketplace looking for clues as to the next sector to wake up, we've identified the Home Builders as a viable option with some clearly defined levels to keep it simple.

It's time to Roll with the Homies.

Mid and small-cap stocks have been under-performing their large-cap counterparts as of late, however, it's important to remember when looking at an index that it's basket of stocks and therefore looking at each of the components can unearth great opportunities. Yesterday we did a deep dive into mid-cap stocks for long opportunities, so today we're following that up with a look for similar setups in small-caps.

Before we get into individual stocks, I want to highlight the potential failed breakdown that we're watching in the index itself. Last week prices undercut the March lows as momentum diverged positively. If we can get back above 8,040, it would confirm a failed breakdown and likely be the catalyst to push this market to new all-time highs. The individual names within this index remain mixed, so a neutral stance remains appropriate in the index itself until this range resolves itself.

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From the desk of Tom Bruni @BruniCharting

If you've been reading this blog you've probably noticed a lot of posts about the areas of the market showing relative strength, like Technology and Consumer Discretionary, however, one industry not getting as much attention is Airlines. The reason for that is simple; the Dow Jones Transportation Index is sitting roughly 3% off all-time highs within a strong uptrend, however, Airlines continue to struggle to gain any altitude, sitting at 52-week lows on an absolute basis and crashing on a relative basis.

The chart below is daily chart of the NYSE Arca Airlines Index - $XAL. For the last 1.5 years we've made absolutely no progress and continues to chop around between 103 and 124. This chart is one we'd put in the "hot mess" category and steer clear of. While there may be opportunities on an absolute basis in individual stocks, or opportunity for range traders in the index, there's often tremendous opportunity cost sitting in markets...

Mid and small-cap stocks have been under-performing their large-cap counterparts as of late, however, it's important to remember when looking at an index that it's basket of stocks and therefore looking at each of the components can unearth great opportunities. In this month's (Premium) Members Only Conference Call we spoke about the strength in the Financial Services, Information Technology, Consumer Goods, and Energy sectors, so this is a follow-up post looking at the mid-cap stocks, many of which are in these sectors, that we want to be buying.

Before we get into individual stocks, I want to highlight the potential failed breakdown that we're watching in the index itself. Last week prices undercut the March lows as momentum diverged positively. If we can get back above 19,200, it would confirm a failed breakdown and likely be the catalyst to push this market to new all-time highs. Due to the strength we're seeing in the stocks discussed throughout this post, we think that is the higher probability outcome, but remain open-minded and have defined our...

Americans love their burgers. And customers around the world love American iconic brands. These two forces are unlikely to change in the near future, and thus sales at McDonald's restaurants around the world should continue to be strong. Of course, I couldn't care less about the fundamentals. I'm just watching price action and volatility and see a nice opportunity to profit shaping up in the options market for $MCD this summer.

Monday afternoon I was down in San Francisco, so I went by the Bloomberg West studios to do a quick hit with Catherine Murray. She asked me about the S&P500, Technology, Financials and the underperformance of Consumer Staples. We also discussed sector rotation and Crude Oil during the segment.

Here is the interview in full:

From the desk of Tom Bruni @BruniCharting

Despite the higher highs and higher lows in the major indices, all-time highs in riskier assets such as micro and small-cap stocks, and fresh breakouts in leading sectors like Technology and Consumer Discretionary, there continues to be a subset of market participants who fight this rally.

I'm a weight of the evidence guy, so I'm happy to change my mind when the data suggests it's time to, but it hasn't and that's why we've written primarily about long setups in the strongest areas of the market like Technology, (Premium Biotech), Consumer Discretionary, Retail, Restaurants,...

Crude Oil has been in a strong uptrend since late last year and is now giving us an opportunity to get involved on the long side once again after our initial price target near 4,425 was exceeded in mid-April.

Over the last two weeks, prices have experienced a swift 13% decline that has brought them back to a confluence of support near 4,425. Given that they're are still above a rising 200-day moving average and momentum remains in a bullish range, we want to be buying this pullback. Our risk is very well-defined at last week's lows of 4,305 and our next upside objective is 20% from current levels at 5,335. We know where we're wrong and the market is likely to let us know very quickly if we are, but for now the primary trend continues to favor the bulls.

Click on chart to enlarge view.

Typically we look to trade in the direction of the underlying trend as that increases our probability of success, however, occasionally lower-probability counter-trend trades offer reward/risk scenarios that are ridiculously skewed in our favor. Today we'll be looking at some of those setups where there are bullish momentum divergences and failed breakdowns that help us to define our risk and put probability in our favor.

A good example of this type of setup is Unichem Labs. Prices have been range-bound for most of the last three years and have been declining for most of 2018. Last week they undercut the 2017 lows and quickly reversed, confirming the potential bullish momentum divergence and failed breakdown. This suggests being long if prices are above the prior lows of 236, with a target near the middle of the range at 285.

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Rotation is the big word that's got us stock market bulls excited around here. It seems every couple of weeks there's a new sector that takes the baton to lead the broader indices higher. And just when one sector looks like it might be running out of steam, another one shows up to take that baton further down the track.

How long until the track runs out of runners? We don't know, but we still see a lot of contestants lacing up their shoes. Either way, after such a great relay race, if you're concerned that the next runner has a higher than normal chance of stepping on a crack, but you'd hate to be sitting on your hands if he builds on the lead, then I've got a trade that I think allows you win in both scenarios.

It's hard for me to make a bearish case for stocks with the Consumer Discretionary sector breaking out on both an absolute and relative basis. In other words, the Consumer Discretionary sector index fund is not only coming out of a 5-month base to new all-time highs, but relative to the S&P500, Discretionaries are coming out of a 30-month base to make new all-time relative highs. This is tough to ignore.

In early May, I pointed out that the Consumer Discretionary vs Consumer Staples ratio making new all-time highs was sector rotation suggesting higher stock prices in general. Since then the S&P500 is up 5.5%, the Small-cap Russell2000 is up 7.6% and the Nasdaq100 is up 7.8%. This sort of behavior is consistent with an environment where the riskier, more speculative, much higher beta Discretionary stocks are outperforming the safer, less risky and much lower beta Staples. 

Every morning I get to wake up and do what I want to do, not what I have to do. Life doesn't always work out that way, so I promise not a day goes by that I'm not incredibly thankful for the opportunities that I have. With a tremendous amount of luck and some hard work, I get to play in the biggest game in town, in every town. Throughout my career, most of my interactions with traders and investors came from living in New York for 15 years. Over the past 18 months, however, I've been traveling throughout Asia learning from investors who come from completely different cultures and bring brand new perspectives to my process.

It's difficult for me to write about these experiences because I truly don't even know where to begin. When I write blog posts and research about technical analysis, I can just tell you what I'm thinking. That's easy and enjoyable for me. But when it comes to really digging down into what the hell I just experienced on the other side of the planet, it's not that simple.

Let me start out by saying that India was the first place I wanted to visit when I decided to invest in myself and go learn from traders who don't live in Long Island,...

I recently received an email from a reader:

Are there situations with options plays where we need to be careful of the underlying's ex-Div day falling within our option's time frame?

The short answer is: YES.

The real answer is: it depends.

It happens far too often: a game-changing company comes on the scene, has a massive run in its share price, makes a ton of people a ton of money, and becomes a media darling with constant, breathless stories about this exciting new widget maker.

But then the sideliners who sat with their hands in their pockets begin to grumble about how "the stock is overbought", "it's going to crash," "the founder is a fraud," "this company is a scam," etc. No skin in the game, just bitter about not participating. It seems in recent years, Tesla (and it's founder Elon Musk) has been the poster child for this phenomenon.

Ignore the noise, follow the price, profit.