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.

That's just a quick little history...

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.

The primary driver of this breakout is going to have to be its two largest components, Tata Consultancy and Infosys, which each make up 25% of the sector index.

Tata Consultancy looks...

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...

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.

From the desk of Tom Bruni @BruniCharting

The dash to trash is a big theme in the first two weeks of 2020, with names like Beyond Meat (BYND) and other beaten-down IPOs from the last year catching a bid and working their way higher.

We've been focusing a lot on the Marijuana sector over the last month because the ETF and many individual names are at levels where it would be logical for a reversal higher to begin.

Today we want to reiterate that potential and highlight two of the largest stocks in the space that are both liquid and offering a skewed reward/risk at current levels.

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.

Let's take a look.

Here's the Nifty Fast Moving Consumer Goods Index attempting to break back above 31,000 resistance as prices reverse from their lows and momentum diverges positively. If prices can break back above that resistance then this long-term uptrend could accelerate and target 39,000 over the course of 2020.

Click on chart to enlarge view.

Here's the Equally-Weighted Fast Moving Consumer Goods Index also reversing higher as momentum diverges. If the sector is going to accelerate higher, this would be a logical level for it to happen at.

...

Sometimes the greatest things in the world are right there in front of you.

Of all the charts I look at and indicators that we include in our process, Consumer Staples relative to the S&P500 has to be one of the most valuable. And for that matter, one of the more simpler tools to use.

Consumer Staples are the things we're theoretically going to buy even if there's a recession or the economy is doing poorly. No matter how bad things get, we're still going to drink beer, smoke cigarettes, brush our teeth, wash our dishes and so forth. Those stocks tend to outperform when the rest of the stock market is falling. Some of the top holdings of the S&P Consumer Staples Index include Colgate-Palmolive, Philip Morris, Procter & Gamble, Coca-Cola and Pepsi.

These stocks represent consumer staples and tend to pay higher dividends and are less volatile than the overall market. We call that "lower beta", because it makes us sound smarter.

Anyway, you can see in this chart how helpful the relative strength in staples has been in identifying trends and turning points:

From the desk of Tom Bruni @BruniCharting

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

Most people were sellers of this one, while some were staying away fearing a whipsaw.

With that as our backdrop, let's take a look at this dumpster fire.

You guys want to hear a funny story?

Let me take you back to simpler times back in 2006 when you used to hear things like, "Real Estate only goes up" and "God only made so much land". Heck, you may have even said those things yourself.

But it was the brilliant market timers at the ETF companies that really stole the show. The iShares U.S. Home Construction Fund $ITB launched on May 1, 2006, and here's what it did immediately after that:

Meanwhile, the SPDR S&P Homebuilders ETF $XHB launched on January 31, 2006, and here's what it did immediately after that:

It doesn't get better than that does it? Classic human behavior at work....