From the desk of Tom Bruni @BruniCharting

Over the weekend as I was doing my run through the entire S&P 500, I noticed some emerging strength in areas that aren't quite as sexy as Medical Devices or Railroads (kidding). Instead, what I found was a number of potential long opportunities in the Real Estate, Utilities, and Telecom sectors. While the long-term relative performance of these sectors is nothing to write home about, as I explained in my Agribusiness post, I still think it's important to point out strength on an absolute basis because it contributes to the weight of the evidence and provides value to those who may have a portfolio approach that includes those areas of the market.

With that said, let's take a quick look at what I'm seeing.

During our August Members-Only Conference Call we discussed a lot of the big-picture trends from around the world and in India, but we wanted to do a long post discussing what we're seeing in the mid-cap space. In this post I'll cover what we're seeing in the index itself, as well as get into some of its most actionable components.

From the desk of Tom Bruni @BruniCharting

On May 1st we spoke about seasonality and why the traditional "Sell In May and Go Away talk is a great headline, but not a great investment strategy this year. While most think that seasonality data is useful to position ahead of what are typically weak or strong periods, we find that the real signal occurs when the market does not adhere to its historical patterns. Now that we're a bit more than half way through the seasonally weak May-October period, we thought it'd be helpful to look at the market's performance thus far and see what it could possibly mean for the rest of the year.

I live in a funny world where I can just write some things on my phone or computer and people all over the world begin commenting on it. These conversations can last for months, even years. Those who know me understand that I try to do my very best everyday to look at the market as nothing but letters and math. It shouldn't matter whether we're long Apple or short soybean futures.

Some assets strike a cord with people and make them feel differently. There is usually a popular figure involved or hot product and sometimes even conspiracy theories. It's fascinating to watch. Gold is definitely one of those. The crazies come out whenever you mention gold, bull or bear doesn't matter. Natural Gas used to be like that 12-15 years ago, but not since it lost 90% of its value over the past decade. This one is the bitcoin of energy.

Over the years, things like Apple and Tesla have had some cult followings in their stocks too. But most recently it's been $TSLA and the fact that they get to gossip about elon musk to get them away from writing about trump every day. Everyone wins. I saw an opportunity...

From the desk of Tom Bruni @BruniCharting

The Retail Sector ETF $XRT just made new all-time daily closing highs. I was going to write an extensive piece on how we got here and the lessons we can take away about knowing what we own and exercising professional skepticism when we hear gross generalizations like "retail is dying", but I don't think I even need to make it that complicated.

It's not about being right, it's about making money. There's a difference and I think that gets forgotten too often. We want to position ourselves where we have the highest probabilities for success as well as where the risk vs reward is skewed in our favor. The goal is not to be right every time. The goal is to be profitable. That's why we're always thinking worst case scenario: always a risk level and always a target.

Today I want to focus in on what we're seeing in the S&P500 because I think that from a risk management standpoint, this 2780-2800 level is a big one today from a structural perspective. Until now, we've used 7000 in the Nasdaq100 and 2650 in the S&P500 as our lines in the sand. We've only wanted to be long if we were above those levels and that has worked out very well. Moving forward, I've identified some higher levels that we need to monitor.

As part of our ongoing partnership with Investor's Business Daily we have added all of the IBD50 components to our equity research coverage. We are updating our Chartbook on a weekly basis and members of Allstarcharts have access to that workbook here.

Today, I wanted to discuss what we're seeing from this group to identify the overall trend for U.S. stocks and also to find trading ideas to profit from that directional move. 

This index is made up of stocks showing both relative strength and positive momentum, in addition to other factors that play a role in adding or removing components from the list of 50. What attracts me to this group, however, is the relative strength and positive momentum, just to be clear.

This is the Innovator IBD50 ETF $FFTY which to me, is still in an uptrend. We want to continue to err on the bullish side of this ETF and the group as a...

If you've been reading our blog for a while, you're probably familiar with our process and how we identify reward/risk scenarios that are ridiculously skewed in our favor. With that said, the way we accomplish that doesn't always look exactly the same. Sometimes we're buying breakouts and trading with the trend, other times we're trading against the trend for mean reversion, and other times it's some combination of strategies.

Life isn't just about Tesla gossip and Apple at a trillion. There is plenty of "less sexy" market behavior to be paying attention to right now that should have serious implications for the overall market. While boring to some, we have a huge amount of respect for Berkshire Hathaway stock. The breakout we got this week is likely to be the beginning of a 25% move higher which should take this one close to a $700B market cap and we want to be buying!

This entire year we've been talking about under-performance in the mid-cap and small-cap segments of the market. To take advantage of that we've wanted to be shorting, or at least avoiding longs in, the weakest names in sectors like Public Sector Banks, Infrastructure, Metals, Media, Realty, etc. Last month many of our downside price targets were hit from a tactical perspective and we took a more neutral approach, waiting for better entries on the short side. Now that we've seen a multi-week bounce off the lows in the mid and small-cap indexes, we're going to revisit the space for the best reward/risk setups on the short side.

From the desk of Tom Bruni @BruniCharting

There's been a lot of talk about equity market breadth both in the US and globally, but one thing I've not seen mentioned throughout the debate is Dow Theory. While there are five tenets of Dow Theory, today I want to focus on the aspect regarding confirmation among the three averages: The Dow Jones Industrial Average, The Dow Jones Transportation Average, and The Dow Jones Utility Average, by assessing their primary trends.