It's hard to ignore certain market moves that tend to be very rare. Bullish outside days that engulf the prior period are one of those. I think this is exactly what we saw this week in the AMEX Arline Index and it is something we want to respect. This is especially the case if you consider where this bullish reversal took place, just below important support.

For me it's not just about buying a group of stocks, but about buying the strongest members of that group. I am a firm believer that by erring on the long side of relative strength or erring on the short side of relative weakness, the odds of a continuation in trend is much greater than the odds of a reversal. Therefore, there is a higher probability of success by following trend, rather than trying to fight trends. So today I want to talk about how we're going to take this top/down approach and apply it to find profitable trades this month in Energy stocks. 

As I mentioned recently, I've been working with some new technology and it's allowing me to easily share analysis in a much more detailed way from a sub-sector perspective. In the first top/down review last week we looked at the Media stocks. Today I want to take a deep dive into the precious metals market and really drill down how we want to approach this market. There is more sensitivity when it comes to participants in this market so knowing that is advantageous. We want to 1) recognize this added sensitivity and 2) try to take advantage of that for profit.

I love technical analysis. I really do. There's no question that finding a nice chart brings a great amount of joy to my life. Today I want to share with you what I think is one of the most important developments to occur over the past couple of months. Interest rates have been ripping higher, yes we know this. But to me it's what is happening in Banks and Real Estate Investment Trusts that continues to grab my attention. These groups of stocks are doing the exact opposite today that they were doing at the beginning of 2016, when I was pounding the table about rates going a lot lower.

Interest rates have exploded higher into year-end from a low near 1.37% on the 10-year yield up to over 2.6%. But one of the big reasons that had me so bullish rates since July was that while the 10-year was making lower lows into the summer, the ratio between Regional Banks and REITs held the early 2015 low and started to rally:

For someone who uses Dow Theory every single day, it's not something that I write about much. I may indirectly reference certain tenets all the time, but rarely do I write specifically about the 130 year old Dow Theory. I think I pretty much laid it all out earlier this year in my post: 5 Things Every Investor Should Know About Dow Theory. The simple minded choose to stick to the Dow Jones Transportation Average and Dow Jones Industrial Average either confirming each other or diverging from one another. And while this may in fact be a one of Charles Dow's tenets (although they were Railroads back then, not the Transports we have today), it does not even make it into my top 5 most important tenets.

One of the characteristics of bull markets and strong uptrends is sector rotation. While Technology was the first to start leading the market higher in July, Financials and Transportation stocks have recently held the leadership duties. You can start to throw in Industrials the past few weeks into the leadership category as well. Meanwhile, some of the mega-cap names have held back Technology, at least temporarily, from continuing to make new highs. But when you look underneath the surface, I believe there is a much different story to tell.

There have been a lot of really amazing moves this week in the market. But one interesting development that I don't hear much chatter about is the monster move in Value stocks vs Growth stocks. Value stocks like Berkshire Hathaway and JP Morgan have exploded higher the past week at the same time that Wells Fargo stopped crashing. Meanwhile, in Growth land Amazon and Facebook have had a tough time. You can see this beautifully in the charts.

Over the past few days I've received requests from readers about my thoughts on Russian stocks. While I don't particularly care about the US/Russia relations when it comes to picking stocks to buy and sell, it seems to be something of interest to a lot of people. So let's dive in.

Every now and then I throw out a mystery chart just to get us thinking. Not knowing what a chart represents helps eliminate biases or any ideas we may already have in our heads. Today we are looking at what I think is one of the more interesting developments in the market today.

Transports this week are hitting new 6-month highs relative to the S&P500. Remember, these guys have been the leader for years. To review, the Dow Jones Transportation Average peaked in late 2014, well before the S&P500 put in its final top in May of 2015. Moving forward, the Dow Transports put in their bottom in January of this year, the month before the S&P500. So yes, we want to continue to look to the Transports for leadership.

Today we are breaking down the Transportation stocks once again to see what is really happening underneath the surface:

You guys know that I consider the S&P500 to be just one index in just one country in just one asset class in the entire world. There is a lot more out there. And while this might be true, I would also argue that this one index is one of the more important ones that we need to be watching. It is a good representation of U.S. Stocks, since the Dow Jones Industrial Average is just 30 names, the Nasdaq is tech-heavy and the NYSE Composite has a lot of international exposure. One can argue that the Russell3000 is the best representation of the U.S. since it represents over 98% of all investable assets in U.S. equities, but there is no liquid asset to gain exposure to it.

So today we are breaking down the S&P500, setting price targets and defining our risk management levels:

It's important to recognize what type of environment we're in for the market. During different times of the year, traders and investors tend to behave in certain ways. When you smooth out the data over many years, their patterns become clear. We all hear about, "Sell in May and Go Away", but what about, "Remember to Buy In November"?

Today we're focusing in on the end of what is historically the worst seasonal period of the year for the Dow Jones Industrial Average. So what happens next?