Have you ever heard that the stock market cannot go higher on an absolute basis if the Equally-Weighted S&P 500 is underperforming its Cap-Weighted counterpart. Does this measure of market breadth have any predictive value with respect to market direction? What about the sectors themselves? Well, we've run the numbers and the answer is no!

From the desk of Tom Bruni @BruniCharting

I received a ton of great responses via Twitter and email for this week's Mystery Chart, so thank you for that.

A lot of you were leaning toward the long side, with different approaches and stops. Some were neutral, but none of you were getting short.

From the desk of Tom Bruni @BruniCharting

A few weeks ago I wrote about Shippers, Casinos, and some Construction/HomeBuilding Related stocks being some of the weakest areas of the market. About the message the market would be sending if those stocks couldn't see downside follow-through after breaking down.

So let's check in on those "shitty" stocks.

This week we have a special guest on the podcast: Eddy Elfenbein of Crossing Wall Street and PM for the $CWS Exchange Traded Fund. This is a show about Technical Analysis so I think it's important to also include some of the masters of Fundamental Analysis to tell us how they find charts and technicals helpful in their process. Eddy is one of the original Financial Bloggers and I have a ton of respect for him and his work. He is a pioneer in both social media and portfolio management. I love how he explains his appreciation for Intermarket Analysis and Relative Strength as useful tools throughout his process. As many of you know, these two are near and dear to my heart so it's cool to see the Fundamental community embracing them in similar ways. This was a fun conversation!

Long-term, we're bullish Equities in India and around the world, but are remaining patient in the near-term due to momentum and breadth divergences we've been seeing across major indexes, sectors, and individual names. It's happening in the US too.

We've been writing about this for a few weeks, so I wanted to follow up today and show the progression of that thesis.

From the desk of Tom Bruni @BruniCharting

Healthcare Providers quickly went from hero to zero in Q4 of 2018 after a failed breakout and bearish momentum divergence, but we're beginning to see signs of a potential mean-reversion over the short-term.

Let's start with Healthcare relative to the S&P 500, which has been unable to find its footing since topping 5 months ago. Prices have now retraced 61.8% of their 2018 rally, which may offer some short-term support and transition the trend from down to sideways.

Click on chart to enlarge view.

The weakest subsector within Healthcare has been Healthcare Providers, but a ratio of the two recently confirmed a bullish momentum divergence and failed breakdown by closing back above 1.85. As long as prices are above that level, our risk is well-defined on the long side for a...

What does it mean when you hear, "Overhead Supply"? How does that help anyone?

The market is a beautiful thing. It's driven by supply and demand dynamics, or buyers and sellers, based on reasons that we don't need to know. I've noticed that the majority of market participants like to worry about the "why?". We choose to worry about the "Where, When and For How Long?". It seems like a much better use of our time, particularly if our only goal is to make money. We're not interested in writing gossip columns.

For me, overhead supply is when there are an overwhelming amount of sellers relative to the amount of buyers around a certain price. Sometimes you get the smartass in the room that says, "Well JC for every buyer there must be a seller". Yes, dummy, but there aren't an equivalent amount of willing buyers and sellers and every price. That's why stocks move.

From the desk of Tom Bruni @BruniCharting

Telecom continues to hold up well, sticking with the "reach for yield" theme we've been discussing month in and month out for a while now.

Let's take a look at the ETF and a few individual names we want to be buying to take advantage of this trend.

"JC I only trade U.S. Stocks" 

"Who cares what Belgium is doing"

"Indian bank stocks? Why are you looking at those?"

Stocks in America don't go up and down because of what is happening in America. Stocks in America go up and down because of what is happening all over the world. This relationship also applies to bonds, commodities and currency markets.

Today I want to focus on what we're seeing globally so we can make much more informed decisions about the current trend. Do we want to be buying stocks or do we want to be selling them?

From the desk of Tom Bruni @BruniCharting

The market remains a “hot mess", so we’re looking under the surface at breadth and risk appetite measures to identify clues as to the potential direction that this 15-month range will resolve itself.

Today I want to look at one of those measures, Consumer Discretionary stocks vs Consumer Staples.

If you're a long-only fund manager that believes the market is headed higher, you're going to be in more aggressive areas of the market like Discretionary. If you believe the market is headed lower or isn't going to do much, you're going to be in the lower beta, often higher dividend Consumer Staple stocks.

So what's happening in these sectors right now?

The Equal-Weight Consumer Discretionary vs Equal-Weight Consumer Staples continues to struggle with a flat 200-day moving average and confluence of support/resistance, but just made new 6-month highs this week. While this chart still work to do to confirm an intermediate-term uptrend, this is extremely constructive action and is suggesting that risk appetite among market participants is beginning to pick up.

Click on chart to enlarge...

I've been talking markets with Liz Claman for the better part of the last decade. Whenever I'm in New York, I like to swing by the FOX studios to say hello. This week we discussed the relative strength in Semi's and how I think they will lead stocks and the S&P500 to new all-time highs.

Here is the clip:

I'm in New York this week for the annual CMT Association Symposium. I always learn so much at this event, not just from the presentations, but from the attendees themselves. A lot of smart folks in one room is a win for all of us.

Tuesday I was up at the Nasdaq to chat with Catherine Murray about the S&P500, my favorite Semiconductor names and where we are in Canadian Equities and Crude Oil.

Here is the video in full: