How can this not be the chart of the week? It should be the chart of the century. Everyone always likes to talk about bubbles and how everything is in a bubble. But what they’re missing is the implications of said bubble popping. Remember we’ve seen price bubbles before, lots of them. One thing you’ll notice is that the bigger the fall in price, the longer the time necessary to repair it.
After 1929, the Dow Jones Industrial Average fell almost 90% from its peak. It took 25 years to finally exceed that level for the first time. Towards the end of 1954, the Dow was able to make a new high and then continued higher for another 12 years before the next secular bear market began. It took a long time to repair that 90% crash, 25 years in fact. This is normal. But what is also normal is that from that repair came another 150% rally after initially exceeding those prior highs.
We're seeing similar activity today in Technology. After peaking in March of 2000, this sector index collapsed by over 82%. It wasn't until the past few months that we have finally been able to break to new all-time highs:
Every month I host a conference call for All Star Charts Premium Members where we discuss ongoing themes throughout the global marketplace as well as changes in trends where new positions would be most appropriate. This includes U.S. Stocks & Sectors, International Stock Indexes, Commodities, Currencies and Interest Rate Markets.
We want to be buying stocks. I don't think I can be any more clear about that.
You guys know me as the obnoxiously bullish guy the past couple of years in the midst of "unprecedented pessimism". I'm willing to admit that I have an unfair advantage that I just pay attention to price and purposely ignore everything else that most of you have to endure. This focus has allowed me to see clearly what is actually taking place instead of assuming that who I'm listening to or reading knows what's going on.
Today I want to show you guys one single chart that I think tells the story of what the hell is going on here. It is awfully difficult for me to be bearish of stocks if the most important sectors in America are not just making new highs, but also breaking out to new relative highs. These leading sectors aren't just doing well, they're outperforming the rest.
U.S. Treasury Bonds have gotten absolutely destroyed, particularly on the shorter end of the curve. With interest rates exploding higher, money has been flowing beautifully out of the bond market. We're obviously happy to see that. It took a little longer to get going than we originally wanted it to, but we got there. So now the reevaluation process is upon us.
Today I want to talk about what we want to do here with respect to Bonds and Interest Rates and what some of our options might be.
It's a bull market in stocks. The bond market is confirming that. Until we start to see evidence that suggests otherwise, we remain in the camp that this is a 'buy weakness' environment and not a time to be selling strength. To get 2018 going on a good note, Consumer Discretionary stocks broke out relative to the S&P500. This is one of the most important sectors in America and I believe it is still in a secular bull market.
Thank you again for being a founding member of Allstarcharts India. You came at a good time - the early stages of the build out of this Technical Analysis Research Platform. As you can see, the Monthly Conference Calls have been live and archived each month so far this year. We will continue with this routine every month moving forward and you can access all of them here: January 2018 and February 2018.
In the next couple of weeks you will be seeing several additions to the platform for Premium Members including several additional notes per week, an enhanced trade ideas page and an expansion of the Chartbook. We're really looking forward to this expansion that we have been working on for a long time. Thanks for your patience!
Andrew Thrasher is the perfect guest to have on the podcast this month. His expertise in Volatility made him the 2017 Charles Dow Award winner, ironically the year that the US Stock market saw the lowest volatility on record.
There is no denying that Technology has been a leader over the past 18 months. It's amazing how much this historic breakout in Tech was completely ignored in 2016 since U.S. elections are much sexier and help news people sell ads. "Forget the relative breakout in Tech, how does what Trump or Hillary said on the twitter today impact your portfolio?" You see the difference? We're not here to entertain or sell ads to sponsors. We're here to try and make money in the market.
Brazil just closed at an all-time daily and weekly closing high. These are not things we normally see in downtrends. Russia's MICEX also closed at new all-time highs. There is some serious strength coming from Emerging Market stocks and the data is still suggesting there is a lot more upside left out of this group. I think we're just getting started.
Today we're taking a look at some equally-weighted emerging market indexes that I put together and compare this group to other alternatives, like U.S. stocks and other developed markets such as Japan and Europe. There is an overwhelming theme here of rotation into Emerging Markets after years and years of underperformance. 2018 is a new year and emerging markets are leading us higher.
Brazil just closed at an all-time daily and weekly closing high. These are not things we normally see in downtrends. Russia's MICEX also closed at new all-time highs. There is some serious strength coming from Emerging Market stocks and the data is still suggesting there is a lot more upside left out of this group. I think we're just getting started.
Today we're taking a look at some equally-weighted emerging market indexes that I put together and compare this group to other alternatives, like U.S. stocks and other developed markets such as Japan and Europe. There is an overwhelming theme here of rotation into Emerging Markets after years and years of underperformance. 2018 is a new year and emerging markets are leading us higher.
