It's that time again. I have a mystery chart that I think is worth paying attention to. As always with these, I took out the y-axis and all labels to eliminate any biases. Remember, the idea is not to guess what this actually is (although most of you guys can't help yourselves). The point of this exercise is to think about what you would do?

This can be a Stock, ETF, Commodity, Currency, Index, Ratio, etc. What do you want to do here? Buy, Sell or Do Nothing?

Hi I’m J.C. and I’m a Technician.

I analyze the behavior of the market and market participants. I do this every day and have been doing this professionally for well over a decade. In 2008 I earned my Chartered Market Technician (CMT) designation and founded Allstarcharts.com in 2010. What started as just a humble blog has turned into one of the fastest growing technical analysis research platforms in the world. The platform is jam packed with actionable trade ideas and analysis, but I recognize this can be overwhelming at times. That's why I'm writing this post - to help our newer members take full advantage of all that the platform has to offer in a short period of time.

When you talk about the "stock market", there is so much more to it than the S&P500 or what the Dow did on a given day, week or month. These are just 2 popular indexes in the most popular country in the world. But in reality, that's all they really are. One of them, the S&P500 is cap-weighted, so the biggest companies in the world, $AAPL $FB $XOM etc, drive the direction of the index. The other, the Dow Jones Industrial Average, is made up of just 30 humongous American stocks. That's what these things are.

The actual stock market, or "market of stocks", includes many more stocks and indexes, not just in the U.S., but globally. Today I want to talk about what we're seeing out of the Financials in Europe and what the implications of the recent behavior might be.

This weekend I took advantage of some time off to go over every single chart that I follow from all over the world. These include U.S. Stocks, Sectors and Indexes, International Indexes, Commodities, Currencies and Interest Rate Markets. There are many people complaining about the uncertainty in the current market environment. But I would argue that there is always uncertainty in the market and today is no different.

Back in January, Energy Stocks put in their lows on both an absolute and relative basis. Whether you're looking at the big Integrated Names like Exxon and Chevron, or the Services Companies like Schlumberger or Halliburton, or even the Explorers and Producers, they all bottomed in January, a month before Crude Oil finally put in its low. Energy stocks also bottomed first on a relative basis when compared with the S&P500.

Today we are looking at the current implications of this particular leadership in the stocks relative to the commodity and the direction in which they are heading:

For newer members I want to give a little bit of background on the 2016 Crude Oil Trade. Back in February our line in the sand was $29.60 based on multiple key Fibonacci extensions clustering together near that level. We wanted to be aggressively long Crude Oil along with energy stocks, emerging market country ETFs as well as the metals and mining stocks and commodities that had high correlations with that particular emerging space. With Crude Oil specifically, our tactical upside target was $38, and our longer-term target was $50. Both of these upside objectives have now been achieved.

So now what?

Relative Strength is something that I take very seriously. When markets are falling, we want to look for stocks holding up the best. That is what we call relative strength and tends to lead us towards the future leaders for ensuing rallies. It's the same thing on the way up. When markets are rallying, like we saw in the past week for stocks, the ones that don't participate are showing their true colors.

One of the most valuable exercises throughout my process is going through every single country around the world looking at both weekly and daily charts. One by one I make my annotations and take my notes. This is certainly time consuming, but the process makes it impossible for me not to notice similar themes going on around the globe. I promise you from the bottom of my heart that the reason I got bullish in late January after being the biggest bear on The Street coming into 2016 was because of the behavior of global markets. My turning bullish had nothing to do with the U.S. stock market.

From the desk of Tom Bruni @brunicharting

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Valeant Pharmaceuticals (VRX) has fallen roughly 90% from its August 2015 highs, but is now potentially setting up for a counter-trend rally.

Structurally this stock remains in a strong downtrend, but is now testing long-term support near 25-27. Prices first tested this level in March and April of this year, rallied briefly, but are now slightly undercutting those lows as momentum attempts to put in a bullish divergence. If prices are above 27 on a weekly closing basis, that would confirm the bullish momentum divergence and failed breakdown.

Last week I shared a chart with you guys where I purposely left out the ticker symbol and y axis. The reason I post these mystery charts every now and then is to eliminate any biases that we all have in these markets. This allows us to approach a market and focus only on the supply and demand dynamics in order to forget everything else.

The most recent Mystery Chart was the U.S. 10-year Note Yield upside down. Here is the actual chart where you can see yields approaching the apex of these two converging trendlines:

One of the most valuable tools we have as technicians is the ability to go through every single stock in the Dow Jones Industrial Average and every sector and sub-sector in the S&P500 so that we can weigh all of the evidence. It might take some time, but I promise you that there is no better way to gauge the strength or weakness in a market, than by going through them all. Since most people don't have the time to do this work as regularly as I do, my annotations and notes can easily be referenced in the Chartbook.

Today I wanted to share some of my conclusions after running through all of the Dow Components and S&P Sectors on both weekly and daily timeframes. This analysis consists of over 120 charts and all of them have been updated today in the Chartbook.

Every now and then I throw out a mystery chart just to get us thinking. Not knowing what a chart represents helps eliminate biases and any ideas we may already have in our heads. Today we are looking at what I think is one of the more interesting developments in the market today.

This is a chart that has been in an uptrend for many years. After about 4 years of consolidation, prices appear to be breaking out above the upper of these two converging trendlines.

Every 2 weeks I sit down with the good folks at Benzinga to chat about the markets on their morning radio show. Today we went over why we want to be shorting stocks. We also talk about what this rally in Japanese Yen means to the U.S. and Japanese Stock Market. With this Yen strength combined with the deterioration in market breadth over the past 6 weeks, there is a lot more to be negative about than positive. Apple is a favorite short of ours and most of the U.S. and European Banks. In fact, it's hard to find a stock out there that isn't a short.

Here is the full interview:
 

I think the bull case for the stock market starts with the European banks. When you talk about bull markets and uptrends, financials need to participate. There's no way around it. If you have European banks crashing to new multi-year lows, it's hard to have a sustainable uptrend in equities. As bearish as I am towards stocks these days, the bull case begins with this sector. It would be irresponsible of me not to recognize that.

Today we're comparing the Financial Sector in Europe to Financials in the U.S. This is a great visual comparison that we look for to determine whether or not there is risk appetite for bank stocks. If European Banks are the ones dragging down the space, we want to see them start to outperform U.S. banks as evidence of risk appetite. So far all we've seen is the exact opposite: new lows, new lows, new lows.

I'm a finalist at this year's Benzinga Fintech Awards in NYC! It's a huge honor to be included among some of the most innovative companies in the world today. This Awards Gala focuses on Fintech and we are up for Best Trade Ideas Research. I put in a lot time and effort into my work, so as a company, we couldn't be more thrilled to, not only be nominated, but be invited to the ceremony as a Finalist.

Every month I host a conference call for All Star Charts Members where we discuss ongoing themes throughout the global marketplace as well as changes in trends where new positions would be most appropriate. This includes U.S. Stocks & Sectors, International Stock Indexes, Commodities, Currencies and Interest Rate Markets.

This month's Conference Call will be held on Wednesday May 11, 2016 at 7PM ET. In this month's call, we will discuss the following topics:

- How Much Can The U.S. Stock Market Fall in Q2?

- Why European Banks Are The Most Important Sector On Earth

- Trade Ideas: Apple, Netflix, Google, Biotech, Gold Miners

- Emerging Markets Led Us Off January Lows. Now What?

- About That Squeeze in the CRB Commodities Index

As always, we'll leave as much time for Q&A as possible. Looking forward to seeing you on the call!

Here are the Registration Details:

When we talk about the most important developments in the world today, we need to define who we are and why this is the case for us. We are market participants who have only one goal: to make money in the market. There are many others out there who are very loud, but are not here to make money in the market. Instead, they get paid to sell banner ads and tv commercials. This is the group that tends to lag price and prefers to focus on what is in the "news". Since price leads the news, these headlines and conversations typically show up well after the fact.

I think today we have a great example of this scenario and very clear conflict of interest.

The debate about whether Amazon is in the Technology Sector or the Consumer Discretionary sector is really a pointless one. It isn't anyone's opinion that Amazon is in the Consumer Discretionary Sector. Amazon IS in the Consumer Discretionary sector. In fact, it represents close to 11% of the S&P Consumer Discretionary Sector Index. Amazon could double tomorrow or go to zero and it will have no impact on the Technology sector. Do you know why? Because it's not in the technology sector. It's in Consumer Disctretionaries.

Anyway, the point is that Amazon has been carrying Discretionaries because of its enormous weighting. But take a look at what the Discretionary space looks like if you take this market-cap weighting out of the equation:

The Stock Market has gone no where in 6 weeks since we originally wanted to take profits on all of the long positions we were laying out in late January and early February. During this period of no advance, we have seen a massive deterioration in market breadth with fewer stocks participating. Important sectors like Technology are breaking down hard, which is further evidence that taking profits in late March was the best course of action.

At this point, we now want to err on the short side and aggressively be positioned to take advantage of more selling to come in stocks.

From the desk of Tom Bruni @BruniCharting

***

Strength across the commodities complex has been a significant theme throughout 2016, but Feeder Cattle has not participated to the upside at all this year. It currently sits at near 3 year lows and is down 15% for the year, but recent price action suggests this market could be setting up for a monster squeeze to the upside.

Structurally, prices have been stuck in the 145-170 range since breaking the uptrend line from the November 2009 lows. Last week prices made new marginal lows as momentum diverged positively. If this sharp reversal back above the December lows holds until the end of the week, it would confirm that bullish divergence and failed breakdown from a structural perspective. The upside target for this potential move would be the YTD highs near 170.