Here's a trade I like a lot right now.

It's in the right sector. The trend is in the right direction. And Momentum is confirming it all.

From the desk of Steve Strazza @Sstrazza

In recent weeks, we've witnessed a powerful rotation as many of the secular laggards have assumed short-term leadership positions.

In today's post, we're going to take a stab at using a new visualization tool in order to illustrate this recent changing of the guard.

This scatter plot is comparing the maximum drawdown from 52-week highs to the March lows (Y-Axis) with the short-term performance off of the May 13th low, among all of the 150+ Dow Jones Industry Indexes. The plot-sizes are based on how large the current drawdown is... In other words, the bigger the dot, the bigger the drop.

From the desk of Steve Strazza @Sstrazza

Thanks to everyone for participating in this week's Mystery Chart. It was a bit of a layup, as most of you were bullish, recognizing the powerful failed breakdown and follow-through back above critical former support.

We would agree and like this chart for a counter-trend move right now as well. But the reason we chose it was really for informational purposes, as we are seeing continuation patterns resolve higher all over the globe right now.

The more of these patterns that resolve to the upside, the stronger the weight of the evidence builds in favor of other consolidations working themselves out higher as well. We are seeing this across all areas of Domestic and International Equity Markets, many of which we'll highlight in this post.

From the desk of Tom Bruni @BruniCharting

Today I want to follow up on JC's post about the direction in which consolidations are resolving, specifically as it relates to Yen/Bonds/Gold and other intermarket risk barometers in our toolbelt.

Let's take a look at the charts and see what conclusions we can draw and what questions we can ask about the future.

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?

Consolidations tend to resolve in the direction of the underlying trend. But when they don't, that's the signal!

An oldie but goodie from the past, that I always think about when this comes up, is the US Treasury Bond Fund back in the Fall of 2016. I remember chatting with Liz Claman at the time about it on FOX. The $TLT was consolidating in a classic, textbook continuation pattern above former resistance from the early 2015 highs:

The bet we were making (for many other factors as well at that time) was that this was not a continuation pattern, and instead a massive failed breakout.

Today I want to talk about how important it is to know what's inside the index funds you own. In many cases they can be misleading. Something like the Dollar Index, for example, which is basically 60% Euro, is not exactly the best barometer of the "U.S. Dollar". The Consumer Discretionary Index is 23% Amazon. Stocks like Google and Facebook aren't even in the Technology Index! Combined, $GOOG & $FB actually make up around 40% of the Communications Index.

It's important to know what you own, or what you're analyzing for that matter. When you talk about the S&P500, this is basically they greatest momentum strategy of all time. It buys more of the biggest and best performing stocks and kicks out the worst ones, replacing them with better performers. For me, this is the best large-cap momentum strategy ever created. 

As June gets under way, it’s time to review positions with June options that remain open (haven’t already hit profit targets or been stopped out).

Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.

Over the past few days, we've had traders and investors from all over the world go through our new Charting School. In case you missed it, I partnered up with a group of Emmy-award winning producers to put together what I think is the best course on Technical Analysis ever created!

I can say that with a straight face because these 6 hours of content are filled with lessons that I've had to learn the hard way over the past 2 decades, plus all of the knowledge I've picked up from the best Technical Analysts in the world, either in real life over the years or on my podcast that now has over 100 interviews.

We've had a lot of feedback so far from people taking the course. The one common denominator between all of them is, "It's Practical".

I'm not trying to give you a "body of knowledge" and let you find your way. This is not a starting point to give you the basics of charting. These 7 Lessons are a non-stop...

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 29, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

This was a special week as Friday marked the end of May which means fresh monthly candlestick data. Analyzing these long-term monthly charts every several weeks is a great exercise as it forces us to take a step back and identify the structural trends that are in place.

As such, this week’s theme is the continued outperformance over both the short and long-term from those areas sporting the strongest primary uptrends.

Tech $XLK is by far the best performing sector over the trailing year. It is also the 2nd best over the past month and quarter, behind Communications $XLC and Health Care $XLV, respectively. Not surprisingly, these same sectors are also the next best performers over the trailing year.

Click table to enlarge view....