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Expert technical analysis of financial markets by JC Parets

[Table Of The Week] Opportunities For An Uncertain Environment

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From the desk of Steve Strazza @Sstrazza

If you read our research regularly you may be sick of this by now, so my apologies. But there is a method to our madness. A tried and true repeatable process that allows us to consistently identify the strongest and weakest areas of the market. Any market. While we’ve focused mainly on US Equities recently, we can apply these same principles to any asset class.

We have continually highlighted the fact that the long-term outperformers are often also the short-term leaders. Why? Because there is empirical evidence to support this and we know it works. I’ll be writing an educational post about this soon.

We’ve also written a lot lately about how one of the main signals we’re looking for before turning bullish on stocks is for the percent of NYSE components to break back above 15%. Well, we’re still not really close, but with such drastic daily swings in the major indexes, this could change fast so we want to be ready if and when it does.

[Read more…]

The 10-Month Moving Average Strategy

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Earlier this week, I put out a note about what I’ve been telling friends and family when they come asking. It comes with the territory right? I’m sure many of you are being sought after in similar ways. It makes sense for this environment.

But the truth is, I underestimated just how much this post would resonate with people. So much so, that I figured I’d write a follow up about another popular, yet simple strategy that I learned a long time ago.

To recap, what the Family & Friends post was about, was the percentage of stocks on the NYSE above their 200 day moving average. Historically, it’s when we’re above 15% and rising that it makes the most sense to own stocks. When we’re below that, it’s further evidence that stocks are a mess.

The reason I like it is because it’s a very infrequent signal, only helpful after severe corrections, and it’s free for anyone to follow. What more can you ask for to give your loved ones an inside look as to how the market works. They’re fascinated by the fact that mathematically, the indexes cannot go up without more stocks going up. But that’s just the way the market works. It’s basic arithmetic.

The reason I prefer the NYSE over the S&P500, let’s say, is because of the International exposure in the NYSE Composite. Remember, over half of the largest 100 stocks on the NYSE are foreign companies. The Nasdaq100 will give you much different data.

Great JC, but this only helps us buy dips. How do we know when to get out? 

Well, it is true. This indicator does not help us get more defensive ahead of the tsunami. We have other tools for that. Similar to how we don’t want to brush our teeth with a hammer. We have different tools for different environments.

So today I wanted to show you another very simple tool that you can keep handy for future cycles. [Read more…]

Chart Summit Podcasts: JC & Jay Woods, NYSE Floor Governor

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A couple of weekends ago, I had the privilege of hosting Chart Summit 2020, an online virtual Technical Analysis conference. We had over 30 presentations, 10,000 attendees and raised a ton of money to help the people who need it most right now. A great part about the whole thing is, not only all the fun we had, but how much we all learned!

I’m so excited about it that we decided to turn my conversation with Jay Woods into a podcast episode, so you can listen to it on the go. Jay is a good friend and currently a Floor Governor of the New York Stock Exchange. It’s one of the most beautiful buildings in the world and it represents so much. Jay is an ambassador for everything it stands for. In this conversation, Jay walks us though exactly what’s going on in the minds of all the traders and market makers that are used to spending their days on the floor of the exchange. These are some interesting times. I couldn’t think of a better time to bring Jay into the conversation.

This was a great chat that I wanted to make sure to share with all of you. I hope you enjoy it!

[Read more…]

Mystery Chart (04-07-2020)

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From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

[Read more…]

What I Tell Friends & Family

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We’re in that part of the cycle where friends from high school are calling me to ask about the market and family members I’ve never spoken to about the markets are now interested. It’s funny what a little volatility can do to peak people’s interests.

Anyway, these calls are coming early and often. Many of you in a similar position to me are probably having the same experience.

Today, I thought I’d just write a quick post about what I’m telling my loved ones when they ask.

First of all, I definitely stress that not having a plan is the first problem. This shouldn’t be the time to try and figure out what to do. This is when stress levels are elevated and when we’re most vulnerable to make irrational decisions. I try to remind them of this, but they don’t care. They never do.

So moving on, the old, “JC, when do I buy stocks?” question keeps coming back. It’s fair. Everyone wants to know. [Read more…]

Why To Expect Massive Swings In Stocks

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The trend for stocks is down. When they do rally, they scream dead-cat bounce. And bonds keep going out at new all-time highs every week. Gold is at its highest prices in 7 years and Interest rates are in free-fall along with bank stocks. What type of environment does this appear like to you? Is it the kind of market where we want to be buying stocks aggressively, or is this the type of market where we want to be smaller, cash heavy and more defensive?

Let’s try to figure it out together.

First of all, Industrials historically have the highest correlation with the S&P500 of all the S&P Sectors. This is what that group currently looks like. One of our most basic technical principles is that former support turns into resistance. We call that Polarity. You can see this taking place in this sector index: [Read more…]

Weekly Performance Recap (04-03-2020)

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From the desk of Steve Strazza @Sstrazza

Every weekend we publish simple performance tables for a variety of different asset classes and categories along with brief 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 Sector tables, as they are both showing continued evidence to support some of the trends we’ve discussed recently.

[Read more…]

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