As I was updating our Monthly Chartbook today for members, one theme that stuck out clear as day is that there are really two separate markets in Indian Stocks right now.

Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. Most of you agreed with me it looked like a structural breakdown that we should be selling as long as prices are below support.

So today I want to reveal the full chart and share why I feel it's relevant.

Coming into the year, the most important chart I was watching was the US Dollar. As far as risk appetite was concerned, I felt the Dollar would be a great tell. The way I saw it, the Dollar rallied throughout 2018 to achieve its upside objective and then broke the uptrend line from those former lows. If we were to just rip through those key levels without at least some kind of pause or consolidation, it would most likely be because of a tremendous flight to safety. Stocks would probably be doing poorly under those conditions.

But flip that thesis upside down, and a weaker Dollar would most likely mean strength in stocks. This is exactly what we've seen throughout January = A weaker Dollar and higher stock prices:

This week we're back with another Mystery Chart.

For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.

The point here is to not guess what it is, but instead to think about what you would do right now. Buy, Sell, or Do Nothing?

For me, price is the most important technical indicator. Everything after that is just a supplement to actual price behavior. In that group of supplements is Momentum. My oscillator of choice is the RSI, or the "Relative Strength Index". I use this indicator in a variety of ways, but today I wanted to show you an easy trick to quickly identify whether momentum is in a bullish range or a bearish range:

We live in a world where kids get 7th place trophies. It's embarrassing.

As my friend Phil Pearlman said in one of our recent podcast episodes, "If my kid ever gets one of those, I'll make him throw it away".  

What's wrong with taking the loss, learning to live with it, and then moving on?

In October, Dr. Brett Steenbarger shared some of his thoughts with us on visualizing yourself taking the loss, before even entering into an investment. Already going through that "pain" in your head makes the loss easier to accept in the future if/when we are wrong.

You know what is not a characteristic of a downtrend? All-time highs!

Friday afternoon, the Medical Equipment Index went out at new all-time weekly closing highs relative to the S&P500. We look to relative strength as a leading or coincident indicator for stocks. This sector's behavior is no different.

There is a reason why Medical Equipment stocks look like Tech stocks and not the rest of Healthcare. They're essentially tech stocks trapped in the body of a healthcare stock. Although they are indeed in the Healthcare space, we need to recognize how they behave, the relative strength vs their peers and then treat them as their own group.

In case you missed it, Medical Equipment stocks went out yesterday at their highest weekly close relative to the S&P500 EVER. This is not evidence of a downtrend or any kind of weakness. Quite the opposite in fact:

Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. Many said that it looked like the long-term downtrend was intact, but that you would wait for a downside resolution from this range before acting. I agreed.

So today, I want to reveal the full chart and share why I feel it's relevant.

When you hear people talking about Dow Theory, it usually revolves around what the Dow Industrials and Transports are doing and whether they are diverging or confirming one another. I want to be perfectly clear that while this is certainly one of Charles Dow's tenets from the late 1800s, this is just one of many, and not even in the top 5, as far as I'm concerned. I encourage you to check out my post: Everything About Dow Theory.

Today, we are indeed going to focus on the behavior of the Dow Jones Industrial Average and Dow Jones Transportation Average. Earlier this week we discussed the Dow Jones Composite, which includes the 15 stocks in the Dow Utility Index as well. For this conversation we're analyzing just the Industrials and Transports.

From the desk of Tom Bruni @BruniCharting

Tuesday I posted a mystery chart and asked you all to let me know what you would do. Buy, sell, or do nothing. Most of you said you'd be short or doing nothing until the range resolves lower, while only one or two of you said you'd be long with a tight stop or were waiting for an upside break.

Given how closely this chart resembles the S&P 500 or other major US Indexes, I wasn't surprised by those responses. It still feels like many people have a short bias, so continued churn at current levels or a slow grind higher could leave a lot of people left behind.

Anyway, here's the actual chart and why I feel it's relevant.