We've been pretty neutral the majority of the U.S. Stock Market indexes over the past couple of weeks since they first starting hitting our upside targets. Some of them, like the Nasdaq100 and Mid-cap400 had yet to reach out upside objectives, but we are approaching those now. I will argue, though, that the developments we've seen are constructive, both in price behavior and in the breadth itself.

Here is what I think we need to keep in mind with each of the major Indexes. We're using only bar charts today in order to put extra emphasis on price for this particular exercise:

From the desk of Thomas Bruni @BruniCharting

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From late January until today, there have been tactical breakouts in currencies of countries with significant commodity exposure relative to the US Dollar. This has provided a tailwind to a number of emerging market equities that have subsequently followed through to the upside. Many of these equity markets are concentrated in Latin America, but areas like South Africa, Africa, Australia, and Turkey have benefited as well.

Whether or not these tactical moves will continue and develop into long-term trends is entirely unknown, but the risk/reward in the US Dollar/Brazilian Real looks particularly skewed in favor of the bears here.

Over the past few days I've received a number of requests from members asking me to post a the updated charts on my favorite U.S .Stock Market short right now. In last week's letter I mentioned how Utilities were not a place we wanted to be long and there were a few ways to take advantage of the individual components of the sector.

Today I want to dive into those individual charts:

From the desk of Thomas Bruni @BruniCharting

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Over the past few weeks there have been some interesting developments in Agriculture commodities, and Soybean Oil is no exception.

Before we get into the price action, I think it's worth noting that we're in the middle of a seasonally strong period for Soybeans, while hedger positioning and public sentiment are coming off multi-year extremes. These should both continue to provide a tailwind for prices of Soybean related markets in the weeks and months ahead.

From the desk of Thomas Bruni @BruniCharting

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I look at a few hundred charts per day across multiple timeframes, and thousands each weekend, but I very rarely find an idea that's actionable at that particular moment. This begs the question of why I look at so many charts if they rarely lead to actually putting on a trade, to which the answer brings us to the title of this post.

When utilizing a top-down approach to technical analysis, every liquid global asset class provides some type of information that's useful, even if you don't trade that asset class directly. Instead, each new piece of data adds to the pool of information that we as market participants use to make decisions. When the weight of evidence suggests a more probable outcome, that is when it's appropriate to put on a trade that expresses that theme or thesis in the most capital-efficient way possible.

I just finished my Commodities and Currencies review for the week and wanted to share some of my notes. Here you go:

For long time readers of All Star Charts, you guys pretty much know my deal. I put in more work that most people and I include markets in my studies that the majority of investors choose to ignore. In order to take a weight-of-the-evidence approach to the market, I need to, in fact, weigh all of the evidence. Therefore, I have to look at every single stock market in the world on both short-term and long-term time frames.

From Latin America, to Europe, to Asia Pacific, all developed economies and emerging markets are on my list. I include every U.S. Stock Market Index, from large-cap S&P500 and DJIA to Small-cap Russell2000 and everything in between. We look at every U.S. Sector and sub-sector, from Energy, to Financials, to Gold Miners and Technology. Then break it down to the individual stock level. On the commodity side, we review 16 commodity futures contracts from Energy to Metals and Agriculture. Then we turn to currency markets, for both informational purposes and trade ideas. Finally, we review a long list of intermarket relationships to help recognize where money is flowing and also again, for trade ideas. The list from where this process begins can be found...

This Thursday March 24th, I will be presenting at an all day live webinar presented by Investor Inspiration. I will be joining six additional speakers and my time slot begins at 1:45PM ET.

During my session, we will be discussing some of the basic technical analysis principles that I incorporate in my work every day. These include Supply & Demand analysis, Momentum, Fibonacci, Correlations and how to use Moving Averages for trend identification. 

We’ve come a long way in the last 3 months.

Back in November of last year, I decided to start writing an “Open Letter About the Current Market Environment” and posting it on my blog. This was just a summary of what I call my “homework” (flipping through hundreds of charts every day to find the best risk/reward setups). I was already doing the work so I thought why not share it with my followers and see if it resonated with them.

As you know, I'm a firm believer in listening to the markets when they speak. And in the case of my open letter, the "market" definitely spoke. My inbox was literally flooded with emails thanking me for the insightful trades included in my letters and asking when the next one would be posted. At that moment, I knew I was on to something BIG. 

It's been awfully lonely being a China bull over the past couple of months. All I keep hearing is how China is falling apart and slowing and all sorts of negative sentiment towards the country and its stock market. In the real world, however, where we are forced to live and where only price pays, we've seen emerging markets dominating for 2 months and I think the squeeze higher we've seen in China is just getting started.

First, here is a chart of the Shanghai Composite breaking below last August's lows to start the new year. After a couple of months down there, we are now back above those former lows confirming a failed breakdown. I think this is the catalyst to continue to send Chinese stocks soaring:

U.S. Treasury Bonds have treated us very well this year. Coming into January we wanted to buy a breakout above $122-123 in the U.S. Treasury Bond ETF $TLT with a target above $133. This upside target was achieved last month as interest rates simultaneously hit our downside target, 1.65% in the 10-year yield. Since then, we've wanted to back off and let new data dictate our next move. Over the past month, we've seen rates bounce back up towards 2.0% and the $TLT has fallen back down towards $128.

The question now becomes: Do we get back in on the long side? Or is there more consolidation or price correction needed first?

This is a forgotten space. Since early 2014, the last time Ags had any sort of meaningful rally, we've just seen a deterioration of prices. Whether you're looking at Corn, or Coffee, or Soybeans, the Ags have gotten destroyed. We've see massive rallies this year out of some of the other commodities like in Energy and Metals. Now I think it's time for the Ags to participate in this Commodities Rally.

One of the best ways to be positioned over the past 2 months has been to be in Emerging Markets, not in U.S. Stocks. I've been pounding the table on this trade since January and it has really worked out in our favor. The big question today is: Now What? Does this thing keep going, or does the longer-term trend of the U.S. outperforming Emerging Markets resume in the second quarter?

The noise surrounding the Federal Reserve is some of the silliest and biggest wastes of time in all of the financial industry. The media loves to talk about it, because well, they get paid to talk, not to help you make money in the market. Discussing the Japanese Yen for hours on end isn't sexy. That doesn't drive traffic or boost ratings. But if you're here to try and make money in the market, it's actually the most important thing to be watching here.

Long-time readers and Members of All Star Charts know how much I've been pounding the table about watching the Yen to gain insight on the direction of the U.S. Stock Market. Notice how last month when Yen put in its top (USD/JPY bottom), the S&P500 made its low on the very same day. The Nasdaq Composite also put in its low that day, so did the Russell2000, so did the Mid-cap 400, so did the Russell Micro-cap Index, so did the NYSE Composite. I can keep going, but I think you get the point.

This has been a pretty simple one coming into 2016. Not all charts are as clean as this, so it's hard for me to argue against selling Growth and buying Value. The longer-term trend has been to buy Growth stocks and sell Value stocks since 2006. This strategy has worked well, except maybe during 2012, but even that correction came within the context of a much larger bull market in Growth vs Value stocks.

Today we are looking at a ratio of the Russell 1000 Growth Index Fund vs the Russell 1000 Value Index Fund (IWF / IWD). This is a weekly line chart going back to the low in 2006 showing prices trending higher between 2 converging uptrend lines:

Cotton has been in a horrific bear market for 5 years. When you talk about some of the worst places to be on planet earth over the past half-decade, Cotton has to be near the top of the list. After peaking near 220 in early 2011, the price of Cotton has collapsed recently hitting a low under 55. 

From the desk of Thomas Bruni @BruniCharting

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Although Turkey has already rallied 25% from the January 20th lows, the weight of evidence suggests this may be the start of a much larger move to the upside on an absolute and relative basis.

Structurally Turkey has been in a downtrend since a failed breakout near its all-time highs of 77.50 in early 2013. In August of 2015 prices broke below long-term support at 40 and have since been building a multi-month base below that level. Last week prices were able to break and close above it, while also closing above the downtrend line from the 2015 highs.

We've had quite a rally over the past month in the U.S. Stock Market. This is exactly the type of behavior that we should come to expect after a failed breakdown and bullish momentum divergence, like we saw occur in early February. Let's remember that the U.S. and other developed markets, like Europe for example, are the laggards here. We turned bullish Global Equities in late January, particularly Emerging Markets, and it wasn't until a retest of the January lows, that we started to see the shift in the U.S. and other developed economies early last month.

We only wanted to be long the S&P500 if we were above the August and September lows. The bullish momentum divergence on last month's sell-off helped spark this mean reversion rally.

Dow Theory is something that gets thrown around a lot, usually irresponsibly. What I mean is, that there is a lot more to Dow Theory that what you normally hear about on the TV or read about on the Internets. Usually, conversations about Dow Theory revolve around the Dow Jones Industrial Average and Dow Jones Transportation Average either confirming or not confirming each other's trends. This is indeed part of Dow Theory, but not even in my top 5 most important Dow Theory Tenets. There are other aspects of Dow Theory that we need to pay attention to even more.

Here are my 5 most important Dow Theory Tenets:

Fibonacci Analysis is one of the most valuable and easy to use tools that we have as market participants. I've studied supply and demand behavior for over a decade, and I find myself using Fibonacci tools every single day. These tools can be applied to all timeframes, not just short-term but longer-term. In fact, contrary to popular belief, technical analysis is more useful and much more reliable the longer your time horizon. Fibonacci is no different. 

This doesn't have to be complicated guys. Supply and Demand dynamics do not change. I keep hearing how this market is "algo driven" or whatever, but those algos are built by humans. Supply and demand is based on fear and greed in humans, whether discretionary or systematic. I think the debate about algos is a waste of time for all of us. Let the noisemakers, who aren't trying to make money in the market, worry about that stuff. We're here to focus on supply and demand. Period.

The S&P500 has struggled over the past week to continue this monster rally from last month's lows. It should not be a surprise to anyone that we have struggled. Why? Because prices just ran into a ton of overhead supply. This correction is normal, and should be expected. Blame the algos if you want to sound smart in front of ignorant people at a cocktail party, but where I come from, we call this "normal":