Daily charts get a lot of love. I certainly preach the value of monthly charts every 30 days or so. But the weekly charts, ladies in gentlemen....the Weekly Charts, allow us to see through the day-to-day noise, but keeps us within an intermediate-term time horizon. On weekend mornings some people read the newspaper with their coffee. I go through my weekly charts.

Here are a few that stood out in the United States this week:

Connie Brown is the author of one of the first books I ever read on Technical Analysis. She was the one who inspired me to use Momentum as a supplement to price behavior, particularly the Relative Strength Index (RSI). It was Connie Brown who taught me how to think outside the box and question the default settings on traditional charting software. It's that next level thinking that has helped me grow throughout my career. It is a real treat for me to have her on the podcast and I think she is a great compliment to some of the other guests we've had on over the years. In this conversation we go back to the stock market panics of the 1800s, go over different global indexes and how to use them to make decisions in our own markets. If you're interested in Technical Analysis at all and want to learn how to think about things a little differently, this is the podcast episode for you!

In this Episode of Allstarcharts Weekly, Steve and I talk about how important it is for Transports, Small-caps and Micro-caps to hold above their August lows. This is a major risk barometer for sure. The Dow Jones Transportation Avg held its early June lows and so did the Russell2000 Small-caps. As long as that remains the case, we believe the path of least resistance is higher for US equities. As a confirmation, we're looking for Micro-caps to get back above their early summer lows. This period reminds us a lot of what we saw in 2016 right before a historic rally in Stocks around the world!

The headlines certainly haven't been kind to any stock whose company does business in China. You wouldn't be faulted for being cautious in this space. That said, there is one very familiar name that in spite of it all has continued to hang in there, setting up for what could quite possibly become a headlines grabbing upside move of its own.

Today we're taking a look at an index that often gets ignored. The Value Line Geometric Index is currently flirting with a multi-decade breakout. This is an equally weighted index using a geometric average, so the daily change is closest to the median stock price change. It's a much broader measure of the market vs something like the Dow Jones Industrial Average. 

It's my favorite exercise each month. There is nothing else I do throughout my entire process that provides as much value as my Monthly Chart Review. Here's what stood out to me this month:

Let's start with Papa Dow. The Dow Jones Industrial Average has gone nowhere for 20 months. Flat for over a year and a half:

Click on Charts To Zoom In

Whenever in doubt zoom out. Here is a much longer-term view to really help put things in perspective. All things considered, this 20 month consolidation is perfectly symmetrical with the prior 20 years. What happens if we clear 27000 and hold it? It looks like a lot of upside to me. All of this is consistent with this correction since January 2018 being a cyclical bear market within a longer-term structural bull market. In other words, a shorter-term correction within a longer-term uptrend. That seems perfectly fair:

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It's that time of the cycle where we begin to evaluate our open positions that are soon expiring. We had a number of September expiration trades that have already closed -- either because their profit target was achieved ($XLB $XLE) or their stop loss level was violated ($AVGO $CSX $HFC $XLY), but we still have four open positions that require our attention as the calendar transitions to September.

We'll talk more about these in our upcoming monthly All Star Options conference call, but I'll give you a head start on our current thinking here:

From the desk of Tom Bruni @BruniCharting

Tuesday's Mystery Chart is one of my favorite charts right now, so thank you all for your feedback and participation.

Everyone was on the same page here, waiting for a resolution before getting involved. Sometimes nothing is the best answer, that's why it's one of the choices.

With that as our backdrop, let's get into it.

This could be a major top in the US Stock Market. It could be a historic top like 2007 or 1929, maybe even 1987. This is certainly a possible outcome.

Something else to consider is that betting on these outcomes is rarely a profitable endeavor. They make movies about the heroes who bet heavily on the financial collapse of 2008 and made fortunes. We talk about these fund managers like legends. What they don't make movies about are the infinite number of investors over the years who have bet on such outcomes, and were wrong instead. I guess Hollywood doesn't think those stories will sell.

I understand the bearish thesis for US Stocks. In fact, we always take the other side of our opinions and try to poke wholes in a given theme. We've been in the camp that since most stocks have gone down to sideways over the past 19 months, this is a classic cyclical bear market. It has gone on through both price and time, not just one of the two. I don't care how you slice it, this was a bear market, and possibly still is.

Now, whenever in doubt, zoom out right? I think we can agree that the rallies of 2016 and 2017 deserved a rest. So the question is whether this "rest...

From the desk of Tom Bruni @BruniCharting

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?

In this Episode of Allstarcharts Weekly, Steve and I talk the relative performance of stocks. When assets are in strong uptrends, they not only perform on an absolute basis, but they tend to outperform their alternatives. With new highs in the S&P500 last month, we've seen nothing but lower highs relative to both Gold and US Treasury Bonds. In fact, on a relative basis, the S&P500 is actually down to its late December 2018 lows. Will they hold or confirm a massive distributive top? I think the resolution will tell us a lot about the strength of the current stock market.

When I go through my charts, I see all kinds of different trends, patterns and consolidations around the world. It really depends on what I'm looking at. However, one area that has been a consistent outperformer is in Medical Device stocks. The way I see it, these are just Tech stocks stuck in the bodies of Healthcare names. So our theme of "bullish tech" makes sense, even though on paper they're Healthcare stocks. 

Here is a chart of the Medical Device & Equipment Index $IHI relative to the S&P500. This one goes from the lower left to the upper right. We call those Uptrends:

When I speak to traders at buy side shops, I've noticed that when it's time to allocate more money into the market, they tend to add to things that have made them feel good and shy away from those that have brought them pain. This is one area where I believe traders will be adding, and not diversifying away from.

Here is a list of stocks we want to be buying or looking to buy on a pullback: