From the desk of Tom Bruni @BruniCharting

While updating our Canadian Chartbooks this weekend, I noticed a few that stood out as offering well-defined opportunities where the reward/risk is skewed in our favor. This short post will outline these names and levels, but members can view all of our Canadian Universe by clicking here.

There aren't many stocks in Canada hitting all-time highs right now, but Rogers Communications is one of them. It's a leading stock in a strong sector, so as long as it's above 68.70, we want to be long with an upside objective of 95.25.

Click on chart to enlarge view.

Financials have been a weak spot in the market, with many long-term topping patterns taking place. Manulife Financial confirmed a head and shoulders top in September and is now retesting its broken neckline. We want to be selling into this strength as long as prices are below 23, with price objectives of 20 and 16.50.

...

There are still a lot of weak stocks out there that continue to show signs of worsening -- especially when they lag during every bounce attempt by the broader indexes. Goldman Sachs $GS is one of them. Goldman has been one of the stocks we've wanted to be short since mid October but the stock kept moving back in forth around our line in the sand -- $218 -- frustrating our attempts to pick a spot.

Last week, $GS finally made what feels like a decisive move to the downside and now is the time to strike.

From the desk of Tom Bruni @BruniCharting

Over the last few weeks we've looked at signs of rising stress in the credit market, interesting relative strength in bond prices, and a trade on the long side in treasury bonds, but today I want to take a comprehensive look at the bond market and highlight what it's signaling for rates and risk appetite in general.

When we want to see what the market is doing on a given day, we all have our list of the ticker symbols we punch in: $DJIA or $SPY or $QQQ. Some people are more global and look at things like Gold, Crude Oil or Interest Rates and countries like Japanese or German Indexes. I talk to guys and gals who tell me the Russell2000 is the market for them. We're all different. The point is to be true to who you are and act accordingly.

I get asked a lot what that list is for me. The way I interpret this question is, “What are the 15 ticker symbols I punch into my charting software to see what the market did or is doing at any point during the day or night?”. 

From the desk of Tom Bruni @BruniCharting

We've been looking for breadth and momentum divergences to be confirmed both in the US and globally to mark the start of "the bottom" in equities as an asset class, so today I want to highlight the breadth of one sector which provides perspective on the current market environment.

From the desk of Tom Bruni @BruniCharting

Momentum and breadth diverged slightly in the major indices and many global markets, leading to a short-term bounce that's been sold into so far. Today I want to look at sector breadth to highlight the extent of the weakness under the surface and outline what we're watching for if/when prices retest their late October, and potentially Q1 lows.

We look at markets globally because that’s what they are, global markets. The weakness in stocks around the world throughout the first couple of quarters this year was a heads up that something was wrong. We did not see the rotation come in, like we had seen so consistently after any sector went through a period of underperformance. Rotation is the lifeblood of a bull market. Money did not flow back into foreign markets, and as it turns out, it was that the U.S. was the last man standing. 

Ok, I'm on an airplane on my way to San Francisco to present at a conference and to hang with our boy JC, so please forgive the liberties I took with the title of this trade plan. Clearly I'm showing my age...

But seriously, the materials sector is offering us some nice premium to put a fast income trade on into the holidays.

I learned a long time ago from one of my early mentors, "Don't Fight Papa Dow". In other words, this is the most important index in the world. When someone asks you what the market did today, they're wondering how the Dow Jones Industrial Average closed for the session. Some people would argue that the S&P500 is more important because it represents 500 stocks, rather than just 30 from in the Dow Industrials. But by that logic, the Russell3000 should be most important because it represents 98% of all investable assets in the U.S. equities market, and contains 3000 stocks. But most non-professionals don't even know the Russell3000 exists. Also, if you overlay the Dow Jones Industrial Average over the S&P500, they move together.

If you get the Dow right, you're likely to get the direction of S&Ps right as well:

So with the Dow Jones Industrial Average reaching its upside objective this year, this is a perfectly logical place for a correction to begin. It didn't mean it necessarily had to start from these levels, but it...

Until stock markets sound the "all clear" signal and we can get back to our regularly scheduled bull market, we have to operate with a different set of rules in order to protect our capital -- both money and mind. Corrective or Bear Markets require a different set of tools. And it's not just knowing that the odds more favor short direction plays versus long direction plays, it's knowing that you have to manage open risk differently. You have to structure trades differently. And you have to operate in shorter time frames.

Down markets can be incredibly profitable for nimble traders. In fact, in my 20-year career, my most profitable years ever were 2000 and 2001 when we were on the backside of the Spring 2000 "dot com" bubble where NASDAQ dropped a dramatic 78%!!