With all the noise surrounding the recent sell-off in the U.S. stock market, it can be easy to forget that there are some areas of the market doing much better than others, and there is a lot of money to be made in the widening of those spreads. This is where intermarket analysis and ratio analysis can really become profitable for a portfolio. Today we are looking at the biggest companies in America, as a group, breaking out to new highs relative to the smallest companies in America: the Micro-caps.

What this ratio tells us, as investors, is the direction of the flow of money. Are institutional dollars flowing into the riskier, smaller companies in the stock market, or is it going into the larger, more traditional, relatively safer segment of the market that is, the Mega-caps. To me, there is no better gauge out there for the Mega-caps other than the old Dow Jones Industrial Average. The 30 components that make up this Index are 30 of the largest companies in America: Apple, Microsoft, Exxon, JNJ, General Electric, etc. When we compare this group to the Russell Micro-cap Index, we get a very clear picture of the direction of money flow.

Here is a 10 year chart...

Ladies and gentlemen, let me introduce you to Tom Bruni @brunicharting

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Non-Correlated Short Setups In Live Cattle

With every global equity market down to start 2016 and media outlets declaring "Markets In Turmoil", it can seem like there are no opportunities to make money in this environment. While it may be true that it's difficult to press shorts while stocks are extended in the short-term, and even more difficult to try to make money on the long side until global markets stabilize for a few days, as market participants we can look at all liquid asset classes around the globe for opportunity.

With that being said, Live Cattle Futures are a non-correlated asset that look interesting on the short side.

From an structural perspective, Live Cattle Futures

We're down 9% from the all-time highs in the S&P500 and I see people acting like 2-year olds that just had their favorite toy taken away from them. "Markets in turmoil".....really? Why, because the market is down 9% from it's highs last year after rallying over 220% over the prior 6 years? Please.

If you don't live in a box and have access to any data that came before tinder was invented, you'll easily be able to see how perfectly normal it is for markets to go both up and down. As someone who looks at stock markets all over the world, commodities and currencies, I see things get absolutely destroyed all the time. Look at the British Pound lately, look at the agricultural commodities,

The global markets are a never ending puzzle that we're all trying to solve. There is never a straight answer because everything is always changing. At different points throughout the never ending evolution of markets, I have what think at the time to be the most important chart in the world, or at least one of them.

Today I believe that we really need to be watching the spread between the U.S. 10-year Treasury note yield and the U.S. Treasury 2-year yield. With 10s currently at 2.18% and 2s at 0.99%, the spread is now at 1.19. This is has been cut in half, and then some, from last year's highs of 2.61. Us market nerds call this a flattening of the yield curve.

Here is the chart of the 10-Year U.S. Treasury Yield minus the 2-Year U.S. Treasury Yield:

Ratio analysis is one of the most valuable tools that we have as market participants. It's important to recognize where money is flowing out of, and where it is going into. This is the case when it comes to stocks, bonds, commodities and currency markets. A lot of these ratios tell us what the institutional money is doing, which is what drives markets. Think about the long-only mutual fund managers as a giant cruise ship. It takes a long time for a cruise ship to turn completely around and go in a different direction. With the amount of money being controlled by mutual fund managers, it's a similar situation. We can spot a cruise ship turning around very easily, because it takes so long. It's not much different in the stock market.

Today we are looking at a ratio of the Consumer Discretionary Sector vs Consumer Staples. The reason this is important is because of the high correlation between

Most of us in the trading and investing universe have the freedom to buy or sell anything we want, whenever we want. Sure, there are some exceptions out there like long-only mutual fund managers that have to pretty much be fully allocated at all times or certain funds out there that have to follow a specific mandate. The majority of us, however, can do anything we want, even if it's nothing at all.

How often do you hear someone on the TV or read in an article that the guru opining on the topic is suggesting that "doing nothing", is the best course of action. It's either a buy or a sell

When calculating risk in a given trade or investment, I find that opportunity cost is often overlooked. Remember, it's not just how much money you can potentially lose on a given position, it's the opportunity to make money elsewhere that you are missing out on while that position remains in your portfolio. This "Opportunity Cost", is the type of risk that we like to refer to as, "A waste of money".  Today I want to point out what waste of both time and money it has been to be in Bank Of America over the past 2 years. But things could be about to change...

There is a lot of noise surrounding the period between Christmas and the start of the new year. Santa Claus rally this, end of 2016 predictions that, what worked this year, what didn't..... The truth is, most of that doesn't matter and is just a lot of air-time filling, click baiting noise. Sure, if Santa Claus doesn't show up and the U.S. Stock Market doesn't rally during the last 5 trading days of the year and first 2 of January, bad things tend to happen. Fine. But end of year predictions are always wrong and they're just a sell side marketing gimmick that the financial media eats up and loves to promote. It's just noise. As far as what worked this year and what didn't - it's too late now anyway, so who cares. We want to look forward don't we? Aren't we here to make money?

What we really want to focus on during this period of the year is

As we close out 2015, one of the biggest stories of the year has to be the crash in Energy prices. The CRB Commodities Index is heavily weighted in Energy and, as an Index, has fallen over 20% this year now down almost 65% from its peak in 2008. Here is how I think we can profit from this in 2016:

This week I sat down with Frances Horodelski over at Business News Network to discuss the disastrous implications of a breakdown in the Dow Jones Industrial Average below last week's lows. Apple continues to be a 'sell on any strength' stock and an inversion of the yield curve is likely to come next year.

Here is the video in full:

This week I had the opportunity to join Joe Weisenthal and Alix Steel on Bloomberg's What’d You Miss? On this appearance I wanted to follow up on our Apple discussion over the Summer when I warned that a break of key support would lead to a much bigger problem. This is precisely what occurred in August and since then this stock has continued to be a sell on any strength. Looking bigger picture, Bonds keep outperforming stocks as they have for the last 2 years and still think this trade keeps working. We also touch on the yield curve where if 10s minus 2s break 1.20, then I think the next stop is an inversion of the yield curve.

Here is the video in full:

Technical Analysis of Stock Trends by Robert D. Edwards and John Magee is widely considered to be the Bible of Technical Analysis. Today I thought it would be a good idea to share with you guys Page 1 of Chapter 1, so you can see exactly what these guys were thinking when they first wrote the book in 1948.

Enjoy!

Since October 23rd, the Dow Jones Industrial Average has been a place where we've wanted to stay away. This was the day that it first crossed above what was then, and still is, a flat 200 day simple moving average. When prices are anywhere near a flat 200 day, we want nothing to do with it. For almost 2 months now, this index has been stuck in a tight, yet volatile range, frustrating both the bulls and the bears along the way. But after the dust has settled, prices are exactly where they started on October 23rd. To me, it's the perfect example of why we avoid these sort of situations. Who needs that headache?

The problem that I see moving forward

The noise surrounding the U.S. Interest Rate Market has been all Fed all the time. For headlines and theory, that's great. For market participants who live in the real world, we like to focus on what the market is actually doing, not what a group of economists may or may not be thinking 8 times a year.

The real story is not what the Federal Reserve is saying. The story is that the yield curve is and has been narrowing. In other words, the spread between long-dated Treasury bond yields and short-term yields has been getting smaller and smaller. Notice how 2-year yields are hitting 5.5-year highs this week, but 30-year yields won't budge as they remain near the same levels from a year ago.

There are plenty of charts that tell this story well, but I think these two

Dear Members,

Thank you to everyone who registered for the new All Star Charts membership. I'm super excited to have you guys as part of our team. Remember, we're all in this together trying to navigate through this market day in and day out. It’s a puzzle that is constantly evolving and what we’re here to do is look for major trends around the world and then break those down to find more intermediate-term investing opportunities based on those structural setups. The new All Star Charts was an idea we’ve been working on for a long time, so we couldn't be happier to finally be able to share the ideas and the homework that I already do with all of our new members. Welcome to our club!

For the past 2 months I’ve been very vocal about how there’s been no reason to own the major U.S. Stock Market Averages. If there’s been any trade to be made, it's

definitely been on the short side. So far this has worked out well, obviously, as the S&P500 and Dow Jones Industrial Average are both down since October 23rd. If you recall, this was the day that they each first crossed above what was then, and still is, a flat 200 day simple moving average. Anyone who knows...

It amazes me how we're almost in 2016 and you still hear what I consider to be intelligent and experienced market participants talk about technical analysis as a self fulfilling prophecy. A statement that technical analysis is self-fulfilling is suggesting that there are events in the market that are caused directly or indirectly by the preceding prediction or expectation that it was going to occur by a group of market technicians. I can understand when a new investor who doesn’t know any better uses the phrase because maybe he/she heard it once before and it sounds smart. That’s just human nature and you can’t fault them for it. But you guys who by now should know better? Come on.

This is a topic that I've brought up before but I think is worth mentioning it again as it has come up in conversation a few times recently. The problem is that this is such a ridiculous claim that I feel stupid even acknowledging it. But I'll address this again anyway.

First of all, charting and technical analysis

Last week I invited everyone to jump on a conference call to discuss what I think are the best 10 charts in the world. I don't want you to think that these are just the 10 best trades, or 10 strongest stocks, or anything like that. It's bigger than that. This list is what I consider to be the 10 most important trends, or changes in trends heading into 2016. If you watch the video, I included 2-3 charts or data points as a supplement to each of the top 10 charts. See: Video Here.

For supplemental charts and further explanation of each of the top 10, please see the full video:

The other day I told someone that I never look at the 50 Day Moving Average and that I haven't for a few years. They couldn't understand why. So I had to explain that it's something I used to keep on my charts, but over time I noticed that it created more noise for me than value, so I eliminated it from my arsenal. I've done this with a lot of technical tools over the years and preferred a more Keep It Simple Stupid approach over a more complicated process.

This whole technical analysis thing first started for me back in 2005 when I realized that I didn't know anything about the stock market. What scared me even more was that there were people sitting around me at work who were twice my age, and in some cases 3 times my age, that swore up and down that they had a handle on the market. I guess I was just lucky at the time to be aware enough to realize that these guys didn't know anything and were doing themselves and their clients a disservice.

I'm glad that you guys are enjoying the weekly letters that I've been putting out since last month. Thanks again for all the great feedback you've been giving me via email or twitter and stocktwits.

This week I wanted to take this to another level and have us all jump on a free conference call to go over what I think are the 10 most important charts in the world. This includes US Stocks, International Markets, Commodities including Metals and Energy, Currencies and US Interest Rates. We will also leave plenty of time for specific questions and chart requests from attendees.