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.

This is a market of stocks, and not just a "stock market".

All of these Indexes, from the Dow Jones Industrial Average to the Russell2000 Small-caps, are made up of components. There are 30 stocks in the Dow and 2000 stocks in the Russell2K, for example.

Are more of them going up? Are more of them making new highs? Are more of them showing bullish momentum characteristics? Are fewer and fewer components doing these things as the indexes make new highs? What about in downtrends? Are more stocks confirming the new lows in the indexes or are fewer and fewer stocks making new lows and showing bearish momentum characteristics as the market makes new lows?

The answers to these types of questions is what we call, "Market Breadth Analysis". There are a lot of ways to do this on all sorts of different time horizons. In this lesson we go over all the methods we use to decipher market breadth, which can be used by both individual traders and the largest financial institutions in the world.

This explanation is taken directly from Lesson 4 from the NEW Allstarcharts Charting School...

This is starting to become a monthly trade.

I like to keep a few delta neutral trades active in the portfolio at all times (if I can). It's a good diversifier and also benefits from sleepy or sideways markets that tend to not help any of my directional trades.

So I regularly scan my list of the most active optionable ETFs to pick out the ones with the highest implied volatility and charts that look like the potential for sideways action setting up (ideally). And once again, for the 3rd month in a row, The utilities sector is standing out for me.

The last two strangles worked out. This time, we're gonna do a slightly different twist.

We've been writing about how the momentum is to the upside for the last few weeks, but now prices are testing overhead supply across all the major Nifty indices.

If you haven't read our last few posts we'd highly encourage it, as they outlined our shorter-term views within the context of the long-term trends.

If you're all caught up, then let's take a look at the levels we're watching in the Nifty 50 and other indices.

Here's the Nifty 50 running into overhead supply near 10,000. Momentum failed to reach overbought territory despite the more than 35% rally since the index's March lows.

Click on chart to enlarge view.

Given the strong momentum of the last two weeks in India, and globally, we don't want to be blindly shorting this first push into resistance. Remember, it's only "potential" resistance until the market proves that it's relevant. And on top of that, the weight of the...

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.

US Stocks remain the strongest game in town, with the Nasdaq 100 closing pennies from all-time highs today.

On the back of that, I wrote a post for US Subscribers outlining what the "safe haven" assets of Yen, Treasury Bonds, and Gold are doing and what it means for stocks as an asset class.

Given that US market action tends to set the tone for the rest of the world, I think it's a good read for Indian market participants as well.

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 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.

Last week, the guys published a bullish piece on Chinese internet stocks. Since then, a bunch of them have already taken off and I don't feel like chasing here. However, one name that wasn't mentioned is setting up for a potential "catch up" trade and the time feels right to jump in.