In this Episode of Allstarcharts Weekly, Steve and I talk about the newest Sector in America: Communications. Back in 2018, the Index makers took out some of our favorite Technology stocks and put them along with some telecom into this new Index called Communications. With Google and Facebook now representing 40% of this $XLC index, the fact that we're just now breaking out to all-time highs says a lot about the space.

This long weekend we had more time to take a step back and think about the things that are currently going on in the market. A big theme that stuck with us was the strength in stocks in the Utilities sector. The question was/is whether this strength in higher dividend paying stocks is evidence that rates are about to fall? Or is there such an overwhelming amount of strength in the stock market, that Utilities are just included in the rally?

Both are acceptable answers and theories, I'd argue. You can find more on that conversation here.

But sometimes I think we just need to pay attention to what's right in front of us, which in this case is Utilities stocks going higher. So why don't we just buy utility stocks and not worry about the bond market for a hot minute? The most bullish thing a stock can do is go up. And that's exactly what's happening here.

From the desk of Tom Bruni @BruniCharting

My big question coming into this weekend was what should we make of the action in Utilities lately and what does it mean for Bonds?

Utilities are making new all-time highs on an absolute basis, posing this question on Twitter: "So is the breakout in Utilities to new all-time highs a signal that a Bond breakout is coming, or is it simply a bi-product of overwhelming demand for Equities?

This got a lot of attention and responses, so I thought it'd be worthwhile to quickly outline what I'm watching in Utilities and the Bond market over the next few weeks.

Yesterday's candle in most of the major indices was a "Bearish Engulfing" candle, which is a short-term reversal signal when it comes in an uptrend.

In today's post, I want to bring that development to your attention and explain what it means within its longer-term context.

Roughly 2 months ago we outlined why there was potential for strength and outperformance from the Nifty Pharma sector and its components.

We've gotten some nice moves since then and given the rotation we're seeing in other areas of the market like Consumer Goods and Technology, the charts are suggesting Pharma stocks are getting ready to accelerate to the upside.

Here's the Nifty Pharma Index, which confirmed a failed breakdown and bullish momentum divergence by closing back above support near 8,000. That defined our risk on the long side and skewed the reward/risk very much in our favor. It's worked well so far and we're now seeing prices accelerate off support and towards our 10,300 target.

Click on chart to enlarge view.

From the desk of Tom Bruni @BruniCharting

In late August we started to see some signs of a potential bottom forming in Commodities as they approached long-term support with momentum diverging and in October we finally got a breakout.

Today that breakout in the Thomson Reuters CRB Commodity Continuous Index remains intact and the trend in Commodities as an asset class has shifted from one we want to be selling rips to one that we're buying dips.

From an intermarket perspective, there are a lot of signals we've discussed that support higher Commodity prices such as the AUD/USD and CAD/USD breakouts, and today I want to share three more data points that have shown up in the last few weeks.

You guys know that I just tell it like it is. I don't care what happens. The stock market can double or can get cut in half. Gold can go to zero tomorrow or to 10,000/oz and I won't care. I'm too old to worry about the economic or social implications of market moves. Been there, done that and it doesn't help. We have to look at everything as objectively as possible.

Now, with that said, I have some thoughts that some of you may not appreciate. But I'm not here to tell you what you want to hear. I'm here to tell you what I'm seeing right? So bear with me.

For those of you who have been around here a while, you remember just how bearish I was towards the US Dollar coming into 2019. The Dollar rolling over was a big catalyst for why we were so bullish of precious metals throughout the first 3 quarters of 2019. It wasn't until September last year that we said, ok it's time to get out.

The Large-Cap indices continue to churn near the highs as Mid and Small-Cap stocks play catchup. Sector leadership remains clear, but we're now beginning to see signs that a former leader turned laggards may start heating up again.

Earlier this week we looked Consumer Goods before they broke out and Technology looks to be showing similar signs of buying pressure.

Let's take a look.

Here's the Nifty IT Index attempting to break back above 16,200 resistance as momentum finally breaks back into overbought territory. If prices can break decisively above resistance then this long-term uptrend could accelerate and target 18,775 over the next few quarters.

Click on chart to enlarge view.

From the desk of Tom Bruni @BruniCharting

Thank you to everyone who responded to this week's mystery chart.

A lot of mixed responses on this depending on their timeframe. Some were shorting the failed move and seeing how it developed, while others were patiently waiting for another breakout attempt to get long.

With that as our backdrop, let's take a look at this week's chart. 

I had a great day in New York City Wednesday. Good meetings, good eats and good people.

BNN Bloomberg was nice enough to invite me on their network to talk charts.

Catherine and I discussed some of my favorite sectors and industry groups. We went over the macro picture and beginning of this new bull market for stocks.

Most importantly, in my opinion, we went over what it would take for us to get more defensive, at least in the near term.

Here's the interview in full:

From the desk of Tom Bruni @BruniCharting

This week's talk of the town is how Financials, particularly Regional Banks, are rolling over relative to the rest of the market at a faster rate than the Yield Curve is rolling over.

While that's certainly something worth noting, Financials as a group don't really become that interesting until they break out to new all-time highs.

The XLF is close, but not there yet.

Instead, I think the focus should be on the Broker-Dealers & Exchanges ETF (IAI) as it presses up against all-time highs of its own.

Let's take a look at what's happening.

Here's the Broker-Dealers & Exchanges ETF (IAI) holding well above its 2007 highs after a successful breakout retest in January 2019. Today, prices are pushing back up against their 2018 highs as momentum approaches overbought territory on the weekly chart, confirming the strength of buyers. From a structural perspective, there's not a lot to dislike here.

Click on chart to enlarge view.

In an environment where we want to be buying stocks, we primarily want to focus on areas of relative strength. With that being said, we also want to be aware of those areas showing relative weakness so that we can avoid them on the long side and short them when the environment is more conducive to shorts.

One clear area of weakness remains Nifty PSU Banks, so let's take a closer look at what's going on.