Some stocks are going up and most stocks are going down. That's been the trend over the past 10 weeks or so. There is nothing out of the ordinary about that and cash heavy positions have helped us tremendously during this period.

As far as the indexes themselves are concerned, I think it's obvious that they're a mess. You've heard me say it a thousand times, "If you trade the averages you'll get average returns". It's something I learned the hard way a long time ago. Focusing on individual stocks, both long and short in this environment continues to make the most sense based on the weight-of-the-evidence.

First we'll look at the stocks that remain weak. We want to keep selling those if they're below key levels. From the long side, it's hard to ignore some of the relative strength out there. If the market catches a bid, those are likely to be the ones that lead us higher.

From the desk of Tom Bruni @BruniCharting

This week's "Chart of the Week" answers the question about what characteristics determine the stocks we're fading strength in, so this premium post will outline the best setups I found during my review of the S&P 1500. If you haven't read the other post, click here to do so as it will provide more context around these trade ideas.

It's a market of stocks, after all. The indexes are one thing, but the components that drive them are another. Last week we laid out a list of the stocks we wanted to be buying for a December rally. The idea was to get involved with stocks already working, rather than trying to get cute and bottom fish the underperformers.

We'll see how that works out. In the meantime, let's take a look at market breadth.

The stock market has spoken and it seems clear that we’re stuck in between some pretty significant levels of support and resistance. This argues for more of a sideways mess type of a market vs a complete collapse, at least for now.

We’ve laid out some important prices where something more substantial would be possible. We’ve successfully held above those key prices. A few examples are Technology $XLK above the 2000 highs, Regional Banks $KRE & Broker Dealers $IAI above their respective 2007 highs. In the indexes, 2660 in the S&P500 is a big one. We’re not going to have a complete collapse if these assets are above those levels. It’s if and when we’re below them that the real problems could start.

All of this suggests that we’re in more of a sideways range type market, at least for now. In that environment, if we’re going to buy stocks, we want to buy strength. I don’t think it’s worth messing around looking for mean reversions. We want to buy what has already been working compared to the rest during the past 2 months of selling pressure.

It's the holiday season here in America and stocks are in a downtrend, or sideways trend at best. What does that mean for us as investors?

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.

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.

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.

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:

I'm in Chicago this week trying to sit down and chat with the smartest people I know in this city. I love the town, but man is it cold!