Some of the most important stocks in the world are at such critical levels that we'd be fools to ignore it.

More specifically, I'm referring to Financials: Broker Dealers and Regional Banks in particular.

As we are all aware, Financials peaked in 2007 before the epic collapse throughout 2008 and into early 2009. The repercussions of those events were felt all over the world. Some people are calling for a repeat of that period. Could we actually see it? Maybe. But I think it's going to depend a lot on the outcome of the current battle taking place between buyers and sellers at one of the most critical levels in the history of these stocks.

From the desk of Tom Bruni @BruniCharting

As part of my weekly review I went through the entire S&P 1500 across on both the weekly and daily timeframes to identify long and short opportunities, as well as any major market themes.

Unfortunately the evidence is still mixed when it comes to the market's next directional move, but there was one chart that I wanted to point out because it reminded that opportunity can often lie where you least expect.

This weekend I was updating our chartbooks for members and preparing for Wednesday's Members-Only Conference Call when I stumbled upon a chart that's too good not to share.

It's a great trade idea, but it also is a great reminder that while the major stock market indexes may not be trending, there's still plenty of opportunity on both the long and short side of this "market of stocks".

From the desk of Tom Bruni @BruniCharting

Yesterday I discussed how we use ratio charts to identify trends for both trading opportunities and information that we can use to make inferences about the stock market's next major move. Today I want to look at an inter-market relationship between Base Metals and Precious Metals that may help provide information about where interest rates are headed.

From the desk of Tom Bruni @BruniCharting

The S&P 500 has rallied more than 10% off its late December lows, making the reward/risk on the long side a lot less favorable as many of the major indexes and sectors approach overhead supply. When the market is at a point on an absolute basis where the weight of the evidence is mixed, the use of ratio charts to identify the trends that are happening under the surface becomes even more valuable. 

Let's get something straight: being a market participant is not a right, it is a privilege. You have a responsibility to yourself, or your clients, to manage risk appropriately. Our goal is to profit while systematically having protection in place to adjust risk according to the environment. Not only is it not easy, the smartest minds in human history have failed in their attempts to profit from the market. See: The Market Owes You Nothing

A long time ago Mike Bellafiore, from SMB Capital, engraved in my mind that we need to be grateful for the opportunity to participate in the market. This isn't a right. We need to be humble and know that Mr. Market is here to take it all away at any given moment. The worst trade of your life could be the next one if you're not careful.

In the final Chart of the Week for 2018, we looked at the US Dollar reaching a key upside objective and then rolling over to finish the year on a sour note. I started out my Q1 2019 Playbook emphasizing the importance of the US Dollar Index in 2019 and I think we're already seeing the implications of a weaker Dollar. I also think this trend is likely to remain in place.

The way we saw it, if the US Dollar were to just break through these levels, without even acknowledging it, then there is most likely a severe flight to safety away from stocks and that's why the Dollar is getting bid up. The counter-argument there is that if the Dollar is weakening, stocks would most likely do well in that environment. That has been our thesis coming into the year.

From the desk of Tom Bruni @BruniCharting

Earlier today we uploaded a post outlining the case for some mean reversion in Canadian Equities, as well as the stocks we're buying to take advantage of that thesis. The same pattern that can potentially drive those stocks higher is also present in the IBD 50 ETF FFTY, so in this post we're outlining the IBD 50 stocks with the best reward/risk.

First let's take a look at the ETF itself, which has fallen 35% since October and recently undercut support as momentum diverged. If prices are above 26.75, this failed breakdown and bullish momentum divergence setup remains intact, targeting former support near 32.

Click on chart to enlarge view.

From the desk of Tom Bruni @BruniCharting

In late November we wrote about the best long and short setups in the TSX 60, and our winners offset those trades that were quickly proven incorrect. In today's environment we're seeing potential for mean reversion in several areas of Canada's stock market, so we're going to focus on the best reward/risk setups on the long side.

First let's start with the sectors and indexes to identify what areas of the market we're likely to find individual stock ideas.

At the broader-market level, the Equal-Weight TSX 60 is attempting to confirm a failed breakdown and bullish momentum divergence by closing above 135.05, which would signal potential upside toward 143.25.

Click on chart to enlarge view.

USD/INR is at an important inflection point that should set the tone for this pair in 2019. Here's what we're watching for clues into its next major move.

Since early October, a big question for us has been, "How low can US Stocks go?  Obviously no one knew then, and no one knows now, so all we did know was that we did not want to own stocks. We wanted to be sellers, not buyers. Go to cash and ask questions later, type of mentality.

We've looked at declines in Crude Oil and widening credit spreads as a gauge for what to expect out of stocks. We've been monitoring market breadth for evidence of confirmations of declining indexes or whether they're diverging from them. These internals studies and intermarket analysis techniques are great and incredibly helpful in any environment. But today I want to focus on specific prices levels for the two most important indexes in America. 

Autos were some of the worst performers in 2018, and new lows on a relative basis to start 2019 suggest the first quarter may bring more of the same for this sector. This post will outline why we want to continue to sell strength in this sector, as well as the best ways to express this theme.

Below is a chart of the Nifty Auto Index hitting new 52-week lows relative to the Nifty 500. This trend of under-performance has been intact since early 2017 and appears to be heading back toward the lows it set in 2012-2013.

Click on chart to enlarge view.