It's been an interesting couple of weeks, eh? Tesla put on a show, Coronavirus, we've gotten a little two-sided action in the broader markets, and volatility reminded us it still exists. But as we know, volatility fades. And right now, there is some elevated premium levels too tempting to ignore. So we're selling some premium here.

From the desk of Tom Bruni @BruniCharting

We often get questions about what levels we're watching or what our stop is, but in truth every market participant has different timeframes, objectives, and plans for how they'll manage their portfolios. It's impossible to answer properly without knowing all of that information.

With that being said, any market participant can identify various levels at which the dynamics of the asset they're trading have changed.

Today I want to walk through an example using the Japan ETF (EWJ) showing how we'd go about identifying those changes through price action and momentum.

From the desk of Tom Bruni @BruniCharting

Thank you to everyone who responded to this week's mystery chart.

Most respondents were waiting for more information before getting long or short but did agree that the trend had shifted to sideways.

With that as our backdrop, let's take a look at this week's chart.

On this episode of the podcast I'm really excited to bring in Quantitative Researcher Chris Cain. Chris found his love for building trading systems while he was a market maker in the bond market for over 10 years. Today he works with Larry Connors and just published a book called The Alpha Formula that you can purchase at a discounted price at Tradingmarkets.com. (Use the Promo Code: "TAF2020" to get the book at half price!) We laugh during the podcast that Chris is so hardcore about this stuff the he actually teaches a course in Python specifically for traders and building strategies. His goal with these systems is to recognize and take advantage of our human behavior flaws so we go over a bunch of those, which I always think is helpful. He also walks through one of the 4 models and explains how having several uncorrelated strategies increases risk adjusted...

From the desk of Tom Bruni @BruniCharting

In this post we're talking about Orange Juice, which may not quench your thirst so stick around to the end for another great bonus chart.

Let's get into it.

We don't have bull markets in America without Financials participating. That's just how it is around here.

I look through a lot of charts, as you guys know, and there are always a few that really stand out and explain the current situation. I've pointed out how there is further potential of overhead supply for stocks at these levels, particularly internationally. That means that, for the most part, the market has proven that there are more willing sellers than buyers around here. You can't see it if you're just looking at S&Ps and the Dow. But when you go sector by sector and country by country, trust me, it's there.

So bringing it back to America, Financials are in quite the predicament. You can't have a success story without an original struggle right? Well this $31 level has been an issue since the epic top in 2007 before the financial crisis:

This is the video recording of the February 2020 Conference Call for Members of All Star Options

From the desk of Tom Bruni @BruniCharting

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?

Today I have a group of charts that I think will help me explain my thought process here. We're keeping this very simple.

Let's go!

The first thing that stands out is the breakout to new all-time highs for the Dow Jones Industrial Average that has not yet been confirmed by the Dow Jones Transportation Average. This rejection in January and failure to exceed those former highs is worrisome. If this market was as strong as some of the other indicators have/had been pointing to, then we should have seen a breakout by now. Here is the Dow Jones Industrial Avg:

Click on Charts to Zoom in

And here is the Dow Jones Transportation Average getting rejected hard last month:

Look at the S&P500 getting to our 3300 target. We don't want to own stocks if we're below 3300 in S&Ps. It's that simple:

...

Two weeks ago we outlined our thesis for near-term weakness in stocks in India and around the globe.

Since then we've outlined additional information that seems to support the thesis that the next few weeks, and potentially months, are to be a choppy environment. (Feb 1, Jan 27, Jan 26, and Jan 25).

After some downside follow-through, many are asking: How low can we go?

In this Episode of Allstarcharts Weekly, Steve and I discuss all the reasons why we're buying bonds right now instead of stocks and commodities. The big point here for me is that it's not just one chart. There is no single holy grail suggesting we buy bonds. This is a weight of the evidence conclusion. It's not one chart, it's hundreds of them all pointing to the exact same thing: Sell stocks and Buy bonds!