Over the last few weeks we've been outlining what conditions would warrant us getting more aggressive on either the long or short side, and last Wednesday we got our signal to get short again.

After the indexes pressed to new marginal highs late in the week, we've finally gotten some downside follow-through to confirm the weakness we were looking for.

Let's review several key aspects of our bearish thesis and a few ways we're taking advantage of the volatility.

From the desk of Tom Bruni @BruniCharting

It's been a while since our last post on Canadian stocks, so today we're going to take a look at the trends that matter and the related trends.

Post #1 of  2 focuses on sector relative trends.

Post #2 of 2 focuses on the absolute trends and stocks we want to be buying and selling.

In our first post, we talked about relative performance in Financials rolling over aggressively. On an absolute basis, the TSX Capped Financials Index is stuck below its December 2018 lows and 2015 highs, much like US Small-Caps, the German DAX, Euro Stoxx 50, and many of the other weakest markets out there. As long as prices are below 263, the bias is to the downside with a target near 210.

Click on chart to enlarge view.

Here's...

From the desk of Tom Bruni @BruniCharting

It's been a while since our last post on Canadian stocks, so today we're going to take a look at the trends that matter and the related trends.

Post #1 of  2 focuses on sector relative trends.

Post #2 of 2 focuses on the absolute trends and stocks we want to be buying and selling.

First, let's start with the TSX Capped Financials which represent 33% of the TSX Composite. This chart has spent the last four years putting in a major top and the underperformance looks likely to continue. From that perspective, can the TSX Composite continue to work sustainably higher if its best players are underperforming so drastically? I'd argue no.

Click on chart to enlarge view.

Meanwhile, Technology goes parabolic relative to the TSX Composite...but it only comprises 7% of the market...

From the desk of Steve Strazza @Sstrazza

We turned bearish on equities in February from a structural standpoint and have been tactically positioning ourselves in both directions since. We've taken advantage of the bifurcated market we're in by continuing to find opportunities on both the long and short side. Right now we believe the near-term risk is to the downside in equities.

How defensive should we be and what will it take for us to turn bullish again?

Last week we put together a list of key levels that we want to see certain assets hold before turning bullish on stocks over any longer-term timeframe. We're using this as our risk gauge for now.

As promised, we put that list into a table so that we can easily track and update its progress. Let's dive in and see what the weight of the evidence is telling us right now.

Most of what you'll hear me talk about are things I've learned from other people. In some cases, they were predecessors of mine and in other cases they're buddies and colleagues. It's funny because I try to do a good job of giving credit when I can, where I remember specifically who I learned something from. You guys who have been following me for a long time know that about me. But the truth is that sometimes I simply forget where I learned it. It's just part of my arsenal and I always assumed it was there.

The best part about this is that sometimes, when I'm lucky, I come to realize down the road where I learned certain things. For example, I was in Chicago last year or maybe the year before that, I forget, and had lunch with Jim Bianco. Of course we can't help ourselves but talk markets so we dive into a heavy bond market conversation (I know you must be shocked if you know Jim that he's arguing about rates lol). Anyway, he proceeds to rip through 20-30 charts in what felt like a matter of seconds. It hit me! THAT is why I rip through so many charts when I give...

This is an intermarket world that we live in. If you think what happens in the commodities and bond market isn't directly tied with what's also happening in the stock market, you've got a lot of homework to do.

You guys who have been following around along time know that we start out every single conversation about the stock market with, "Okay, what are bonds and commodities doing". It starts there. And then we go into the asset in question.

Look at Crude Oil still crashing down to new multi-decade lows:

Most of what you'll hear me talk about are things I've learned from other people. In some cases, they were predecessors of mine and in other cases they're buddies and colleagues. It's funny because I try to do a good job of giving credit when I can, where I remember specifically who I learned something from. You guys who have been following me for a long time know that about me. But the truth is that sometimes I simply forget where I learned it. It's just part of my arsenal and I always assumed it was there.

The best part about this is that sometimes, when I'm lucky, I come to realize down the road where I learned certain things. For example, I was in Chicago last year or maybe the year before that, I forget, and had lunch with Jim Bianco. Of course we can't help ourselves but talk markets so we dive into a heavy bond market conversation (I know you must be shocked if you know Jim that he's arguing about rates lol). Anyway, he proceeds to rip through 20-30 charts in what felt like a matter of seconds. It hit me! THAT is why I rip through so many charts when I give...

From the desk of Steve Strazza @Sstrazza

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

As this is something we do internally on a daily basis, we believe sharing it with clients will add value and help them better understand our top-down approach. We use these tables to provide insight into both relative strength and market internals.

This week we want to highlight our US Equity Index and Industry tables as they illustrate an important resumption in leadership from the market's most resilient areas.

Click on table to enlarge view.

After some mean reversion last week, the trend in Nasdaq outperformance and small-cap underperformance reasserted itself this week as the Nasdaq 100 (QQQ) was up 7%...

The joke around our virtual office this morning was that the nasdaq is not just strong as an index, the stock itself really stands out!

The exchanges and "marketplaces" are really shining. The relative strength compared to many other sectors and industry groups is off the charts (see what I did there?)

Take a look at names like CME Group, Market Access and Tradeweb. These names keep popping up on our relative strength scans, especially compared to other types of "financials". But let's be serious, these are tech stocks.

This is the chart of the Nasdaq that has our attention:

From the desk of Steve Strazza @Sstrazza

Thanks to everyone for participating in this week’s Mystery Chart. The responses were pretty mixed with most wanting to do nothing for now and wait for a retest of the recent highs or lows before taking action.

While it's hard not to like this uptrend over the long-term, doing nothing in the near-term is more or less the camp we're in as well.

With that as our backdrop let's discuss why this chart is important and on our radar right now.

This is a daily line chart of the All Star Charts Custom MAGA Index, which is an equally weighted index of the four largest stocks in the US Equity Market, measured by market capitalization.

From the desk of Steve Strazza @Sstrazza

Today, we put out a post outlining why we are bearish on Small-Cap stocks and want to be shorting the Russell 2000 ETF (IWM). Read it here as it sets the stage for this post.

Small-caps are the weakest area of US Equities. That's why we are expressing our bearish view on stocks via the Russell 2000 as opposed to one of the large-cap indexes, all of which the Russell has severely underperformed for several years now.

In line with our top-down approach, we don't just want to short an index. We are believers that playing the averages results in average returns.

For this reason, we've drilled into the Russell 2000, looked at every single chart and picked out the weakest names we could find with clearly defined risk management levels to limit us to the smallest of losses in the case these names mean-revert higher.

Adam Koos is a portfolio manager who uses Technical Analysis to make decisions for the clients he advises. In times like these, Financial Advisors all over the world are getting asked the hard questions. In this episode, Adam talks about how Technical Analysis has helped both his decision making and the communication with the families he works for. It's really cool to see these tools helping advisors everywhere, and especially a friend who I speak to regularly about markets and other common interests, like sports and wine.

Adam and I were coincidentally both featured in a Wall Street Journal article this week where we shared some of our favorite tools to help us in the current environment. He is the Founder of...