From the desk of Tom Bruni

Many have fixated their attention on the "triangle pattern" that's formed the NYSE Composite Index and other major US indices.  This pattern is a visual representation of the indecision between buyers and sellers in the market, and its resolution typically leads to a significant move in the direction of its breakout.  In times like this where the index itself has little directional conviction, a study of the components may offer some insight into which way the market resolves.

It's impossible for me to ignore. As someone who pays such close attention to Momentum, the fact that there are so few stocks showing bearish momentum characteristics is absurd. The overwhelming strength being shown here from stocks is spectacularly bullish in my opinion. Combine that with the fact that everyone thinks the world is coming to end, and boom, you've got a trade!

Until proven otherwise, it is irresponsible to be positioning for a bear market right now. The talking heads and twitterverse all seem to be rooting for -- cheering for, even -- the S&P 500 to break it's 200-day moving average and crash further from there.

It's ok to root for any scenario you'd like, but it's simply unprofitable to act on opinions (yours or others) until there is a basis of fact to back you up. And the only facts we focus on here are those presented and derived by price and volume.

The weight of the evidence still points to higher prices in equities over the intermediate term, and as such we're hunting for bullish trades. Today's hunt yielded a developing opportunity in Caterpillar $CAT.

It's no secret that JC and I are extremely bullish on stocks. Just like you'd like to see in a bullish environment, we're being led higher by tech stocks. And there's no better barometer of health in the tech sector than seeing old bellweather Microsoft still hanging around new all-time highs and cruising comfortably above it's 200 day moving average.

From the Desk of Tom Bruni

Three weeks ago I had the pleasure of attending the CMT Association’s 45th Annual Symposium in the Financial District of New York City. In prior years I’ve lived vicariously through previous attendees’ tweets and blog posts, so this year I was equally nervous and excited when I decided to attend in person for the first time.

This year’s theme was “Navigating the Gap: Forces That Influence Price Dynamics”, which suggests that there’s a “gap” between the market price of securities and their intrinsic value and that technical analysis can help in navigating that gap by providing a way to analyze market behavior and the law of supply and demand. As market practitioners we know that markets are not efficient, which is why we all do the work that we do.

After a strong 2017 for equities as an asset class, 2018 has started off with a bit of a change of character. Volatility is back and frustrating stock market participants, with the median of 43 global stock market indices correcting 11% peak to trough, however, as of today 31 of 43 (72%) stock markets are in a confirmed uptrend as indicated by a rising 200-day moving average. The median equity market is off 5.77% from its 52-week high and has not hit a 52-week high in 66 days, or about 3 months/1 quarter.

I don't know about you, but at face value these stats do not seem to support the prevailing sentiment that stocks are headed lower, and much lower at that. There are some valid concerns, yes, but after looking at charts from all over the world, the weight of the evidence continues to suggest higher stock prices globally. Still, many question what will be the driving force behind higher prices. Well, in regards to India I see several failed bearish patterns that could fuel new highs in the major indices.

It's hard for a mechanic to tell you what's wrong with your car without lifting the hood to see what's inside. In the stock market it's no different. We often hear people giving a diagnoses of the market's health simply by using the S&P500 or some other popular index. To me, that's irresponsible. This is not a stock market, it's a "market of stocks". There are 500 stocks in the S&P500. The market is not a thing, it's a lot of things.

Sector rotation is the lifeblood of any bull market. Some sectors are indicators of risk appetite while others point to risk aversion. Consumer Discretionary stocks include companies where we spend our discretionary income: retailers, homebuilders and autos for example. Consumer Staples, on the other hand, consist of companies that consumers would use regardless of whether times are good or bad. No matter how the economy is doing, we're still going to drink beer, smoke cigarettes, brush our teeth, wash our dishes and clean our clothes. These types of companies are the Staples.

If you're a buy side long only manager, you can't short stocks and you can't go to cash. The mandates of these mutual funds require managers...

From the Desk of Tom Bruni

This past Wednesday I had the privilege of joining 7 world-class Market Technicians in the Stocktoberfest East Chart Battle Competition. It was a lot of fun to share my work with the 450+ conference attendees and surreal to share the stage with people I've learned from since day one of learning Technical Analysis. With that being said, I was knocked out in the second round by Charlie Bilello so I'm writing this post to show all three of my ideas in their entirety.

From the Desk of Tom Bruni

Commodity strength has been a clear theme over the intermediate term, with the energy complex and base metals doing a majority of the heavy lifting in helping the CRB Index break out of its 2+ year range. The 41% of the index made up of Agricultural commodities has seen mixed performance, with Cotton and Cocoa leading and Sugar and Coffee struggling to put in any sort of meaningful bottom. However, there has been some improvement in the action in Soybeans and Soybean Meal, as well as Corn and Wheat which should support the CRB Index in moving higher. With that being said, this post is going to focus on the three Soy related commodities.

I think seasonality is often misused. Although economic cycles, political climates and public markets are constantly changing, the behavior patterns of humans remain the same. I spend a lot of time studying cognitive behavior and markets and it is very clear how foolish humans can be, including the robots they build. We behave in specific ways during some parts of the year and completely different in others. Those cycles play a role in annual cycles.

One of the most popular, and misunderstood, is the old "Sell in May and Go Away". But what exactly does that mean? Should we blindly enter the month of May with a bearish selling strategy? Does that sound like a good idea? Historically stocks are up for the month of May about half the time and since 1950 the S&P and Dow average a 0% return. June has a similar history of 0% average returns and positive return close to half the time. But that's not really what we're interested in here, which is my point.

We care more about what this "Sell in May and Go Away" saying means for rest of the year and what it says about the current behavior of investors? Remember, the reason this phrase is popular is...

This is the most valuable analysis I do every month. When you sit there with some music on and just rip through monthly charts, it really gives you perspective. We're taking a step back and reanalyzing the trends. It's easy to get caught in the day-to-day noise. This exercise helps avoid getting whipped around. I encourage everyone to make their own list of Monthly Candles.

I just got back from a week in New York City and here's what I see: The winners keep winning, the losers keep losing, things keep getting better and people think they're getting worse. I like that combination.

When I was 18 years old I moved to the New York area and spent a total of 15 years out there, most of which was in the financial space surrounded by entrepreneurs, traders, investors, analysts, fintech, traditional media and the biggest names in financial social media.

For the past 3 year's I've lived in beautiful Sonoma Valley, CA in what some might describe as something of a bubble. I don't watch financial television. I'm not ‘in the know’ about the daily gossip except for what I see on twitter. And even then, I don't consume nearly as much of it as most people. I'm not at the Hunt & Fish club once a week, I don't attend every book party in New York and I'm not surrounded by financial journalists every day. I'm out.

This can be a good thing or a bad thing. I worry about what some of the negative implications are from this strategy. That's how I think: Risk Management. “How is this wrong?” is my concern. Why don't other people...

This opportunity could not be more simple. Here's JC's take:

Silver has been consolidating in an ever tightening range and signs are showing that a big move away from this consolidation is setting up. And this week, the Silver iShares ETF ($SLV) may have tipped it's hand to which direction the next big move will happen.

And that move is up.

Every month I host a conference call for All Star Charts India Premium Members where we discuss ongoing themes throughout the India Share Market. We take a look at all of the NSE Indexes and Sectors as well as some of our own custom indexes. At Allstarcharts we have become known around the world for the top/down approach to stocks. After we analyze each of the indexes and sectors and have identified where the strength and weakness lies, then we break it down to individual stock opportunities. By having momentum, relative strength and market trend in our favor, the probabilities of success increase dramatically.

We've been bullish towards Indian and Global Stocks as they remain in strong uptrends on any sort of intermediate-term time horizon. I still think this is an environment where we need to be buying weakness in stocks, not selling strength. The weight of the evidence is still pointing to an increased amount of risk appetite, not risk aversion. We will go over a multi-timeframe approach on this conference call where we will start with the longer-term and then work our way...

Every month I host a conference call for All Star Charts Premium 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.

The new volatility regime in 2018 has caused many to question the uptrend in stocks that we've seen the past couple of years. In this call we will go over all of the markets around the world including intermarket relationships that help us identify whether risk appetite overwhelms any risk aversion we're seeing from institutional investors. On Thursday, we'll focus on a series of indicators that we look for to develop a list of stocks and commodities that we want to be buying throughout the 2nd quarter. I think there is more opportunity to profit today than we've seen in a long time.

This month's Conference Call will be held on Thursday April 19th at 7PM ET. Here are the Registration Details:

Over 90% of the time, sentiment data is completely useless to me. I only care about it when we see it at or near extremes, which is not often. Some people dismiss sentiment data altogether in favor of tools that can be used more frequently. Not me. I'll stay patient all day and just wait for my pitch. The unwinds from extremes in sentiment can be very powerful and last much longer than investors usually expect.

Currently, we're seeing an interesting setup in Silver. Commercial Hedgers, which are traditionally the "Smart Money", have on pretty much their smallest hedges of all-time. In fact, Commercial Hedgers, who are always short Silver Futures, it's just how short, are now almost net long! That never ever happens. So it's got my attention.

As homo sapiens we're hard wired to feel the need to gossip. This goes back hundreds of thousands of years throughout evolution. We still see it today and through the speed of communication technology, that gossip gets amplified. While some would argue the issues of today's society are unique, anyone who studies history knows that none of what we're seeing today is new.

It's our job as investors to be aware of this cognitive behavior flaw and work on avoiding the potentially disastrous implications of allowing our evolutionary gossip habits to enter into our portfolio decision making process. I've seen some amazing technicians and traders let their political opinions get in the way of their "process" and watched their horrible downfall. It's been heart wrenching to watch, but the lessons learned by witnessing their collapse is something that will stay with me forever.

The current political and economic environment is unique in it's own way, but they always are. Rather than focusing on the noise, I've found it extremely valuable to pay attention to the only thing that actually pays us: price.

I rip through 5000 charts a week, and most of the time even...

Stocks in India are going up, on both an absolute and relative basis. Let's not forget that. So it's our job to isolate the ones with the most favorable risk vs reward scenarios. The idea is to risk the least amount in the case that we're wrong, but be able to profit the most when we're right. This week I put together a list of the stocks with attractive setups in the NIFTY50 Index. Today we're focusing on the NIFTY Next 50, which are the remaining stocks in the NIFTY100.

I look at facts. There are many people who choose a variety of other factors that aren't necessarily true. Market participants all over the world look at economic data (which are estimates), statements from CEOs of companies (do you trust them all? if not, which ones and why?), analysts ratings (are opinions) and an infinite of other metrics that have no history of being fact. Price, on the other hand, is the only truth we can be confident in believing. I'm selfish, if I can't trust that my data is correct, how could I possibly trust the outcome?

The way I look at markets is very simple: we want to see relative strength and positive momentum. Today, we're going to stick with momentum itself and what has happened the past few months. To be clear, I explain my entire process of analyzing momentum on this page. The get to the point of this post, we all need to understand that when momentum is in a bullish range, it is confirming that prices are in, or still in, an uptrend. It's when momentum falls into a bearish range that the evidence points to a downtrend...

As we enter the second quarter I would say there are mixed signals coming from different markets. My conclusion is that there are more positives than negatives. One in particular that stands out is the strength in Indian Banks. A few of them are pushing up against new highs and both the relative strength and positive momentum in such an important sector can't be ignored. Also, we're seeing strength around the world in Emerging Markets, India included. I think we're finally seeing the rotation back into India on a relative basis.

Today we're going over some of the more favorable risk vs reward opportunities within the NIFTY50 Stocks:

You often hear people call it, "Dr. Copper". They say the metal has a Ph.D. in economics because of its ability to predict turning points in the global economy. I'm not sure about all that, but I do see a strong correlation between it and Emerging Market stocks. Today we're taking a look at these two assets and why Copper's next move is likely to coincide with the direction of Emerging Market stocks.