From the desk of Steve Strazza @Sstrazza

Lots of charts are being shared showing the exponential growth in trading activity, new accounts, and anything else that might paint a story of euphoria at retail and discount brokerages since the pandemic broke out.

Here is some personal background only to provide context for what I’m about to discuss.

I live on an island. It is tiny, about 4 square miles. In fact, I live on an obscure island just above Key West which is technically much smaller than that. As a “Census Designated Place” it’s really just a collection of roads and canals, a village of about 4,400 people.

It’s nice, but it comes at the cost of an economy that relies almost entirely on Tourism. The people who live here are more or less fishermen or workers at the many hotels, bars, and restaurants in what’s generally a booming downtown area. Since shutting down our borders months ago, the local unemployment rate has spiked to an estimated 50%.

Earlier this month we outlined the "Five Bull Market Barometers" we're watching to identify the beginning of a new bull market in stocks.

In this post, we'll update those charts without going into as much detail as to why they're important. So if you haven't read our initial post linked above, we'd encourage you to check it out.

With that said, let's jump in and see how these charts have developed since.

From the desk of Steve Strazza @Sstrazza

Yesterday, we wrote about the divergence in both structural and tactical trends between Dow Transports and Semiconductors. The bottom line is that Dow Transports (DJT), which is the traditional "Dow Theory" average, has been getting smoked relative to the "New Dow Theory" average, the Semiconductor Index (SOX).

While we don't know whether or not this can persist indefinitely or if these divergences will soon resolve themselves, we do know that Semiconductors remain one of the secular leaders and are thus an area we want to continue to bet on from the long side.

In this post, we'll outline some Trade Ideas in our favorite Semiconductor names.

Something all of these setups have in common is that they are exhibiting impressive relative strength vs the broader market. They also all resolved to fresh highs recently, which gives us a well-defined risk management level to trade against.

We have included...

Yesterday in our Monthly Conference Call we discussed relative strength in detail and how we're using it to identify opportunities in the current market environment.

Today we wrote a detailed post expanding on our thought process, which we'd highly encourage you to read before continuing with this post.

In this post, we're going to outline several market-neutral trades we think are actionable today.

During Tuesday's Members-Only Conference Call we discussed not wanting to be aggressively long or short stocks on an absolute basis. Our Five Bull Market Barometers continue to suggest this is a choppy, messy environment where we need to be very selective when putting capital to work. Cash/patience and uncorrelated trades like Gold continue to work for those who have the ability to stay out of the equity market.

Not everyone has that luxury though. Many fund managers have a mandate to be long stocks regardless of the market environment. Some may have the ability to short stocks against their exposure, but many are "long-only" and need to outperform in weak markets by owning the stocks that are going down less.

The easiest way to identify the types of stocks that are outperforming, as well as market-neutral opportunities for those with the ability...

Yesterday in our Monthly Conference Call we discussed our preference for market-neutral and uncorrelated trades given the choppy environment that continues for stocks on an absolute basis.

With that said, today we're taking a look at a stock with clearly defined risk and a heavily skewed reward/risk on the long side.

From the desk of Steve Strazza @Sstrazza

JC summed up our present view on US Equities perfectly during this week's Conference Call:

"There are stocks we want to buy, and there are stocks we want to sell," he told Premium Members on Monday night.

Some areas, particularly the secular leaders coming into the selloff, continue to trend aggressively higher while others refuse to participate in any meaningful upside.

A great example of this is illustrated by contrasting the chart of the Dow Jones Transports (DJT) to what we consider the "New Dow Theory" Average, the PHLX Semiconductor Index (SOX).

This is the video recording of the May 2020 Conference Call.

During Chart Summit India we outlined a number of stocks showing relative strength and positive momentum characteristics, one of which was Bharti Airtel.

With the stock hitting new all-time highs, we want to share two more charts that suggest money may continue flowing into the entire Telecom sector.

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 15, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

This week's main theme is that the strong continue to get stronger and vice versa, which we'll highlight in our Industry and Sector ETF tables, below.

Notice how the top three performers this week also happen to be the only Industry ETFs that are positive over the trailing 3-month period?

Gold Miners (GDX), Biotech (IBB), and Internet (FDN) posting positive 3-month returns may not sound like much but is actually quite impressive as it means these areas have already taken out their highs from just before the broader market peaked and collapsed in February.

Click table to enlarge view.

Their strength stands in stark contrast to some of the more cyclical Industry ETFs such as Banks (KBE),...

Earlier this month we outlined the "Five Bull Market Barometers" we're watching to identify the beginning of a new bull market in stocks.

In this post, we'll update those charts without going into as much detail as to why they're important. So if you haven't read our initial post linked above, we'd encourage you to check it out.

With that said, let's jump in and see how these charts have developed since.

From the desk of Steve Strazza @Sstrazza

This week's Mystery Chart was a simple yet pivotal one... it was a ratio chart of Stocks vs Treasury Bonds.

With stocks struggling at resistance this week and Treasuries meandering beneath all-time highs, both appear to be at key inflection points.

Making things even more interesting is that the S&P 500 (SPY) relative to 20+ Year Treasury Bonds (TLT) ratio is also at a key level of interest. It is make-or-break time for these two asset classes so let's dive in and see what's going on.