It's the end of the month so you know what that means: Brand new freshly completed monthly candlesticks for us to review. While I normally use weekly charts to get structural perspective on markets and then daily charts for tactical purposes, the monthly chart review is done at the end of each month to help identify the primary trends around the market. This is for us who want to avoid the day to day noise surrounding politics or the Fed or whatever news story is being sensationalized this week.

This is a global market environment. The S&P500 goes up and down based on the collective money flow from investors all over the world, not just within the borders of the United States. There are some people still fighting the civil war who simply don't understand this concept. US Stocks don't move up and down based on what is happening in America. What happens in the United States politically, economically, tax-wise, etc is just a tiny tiny piece of a humongous puzzle. This is a global market environment and the sooner you recognize that the bigger the advantage you will have over others who have not yet accepted this concept.

Even if you only trade US Stocks, or stocks local to where you live, understanding what is happening globally is essential to recognizing the direction of the underlying trend for the asset. And this trend identification is step 1 to market analysis. Today I went through every stock market index in the world to see if there is more good or more bad out there. Here are a few stand outs:

(click charts to zoom in)

My weekly run through the S&P500 components is one of my favorite parts of the work week. I put on some music and go through all 1000+ charts. Remember we use the weekly charts to get structural perspective and then the daily timeframes to define more tactical opportunities: 2 charts for each of the 500 stocks. I then break down the index into 11 Sectors and run my analysis of stocks one sector at a time. This way it helps give me a better feel for that particular area within the entire stock market. To take it one step further, I then break down each of the 11 sector workbooks of charts into sub-sectors. So for example, in the "Energy Sector" there will be 4 sub-sectors: Integrateds, Services, Exploration/Production and Refiners.

The reason I'm really pressing this process lately is because of just how sideways the market has been for U.S. Stock Indexes. In order to get clues as to which way this consolidation will revolve is to look under the hood and see what's going on. Does the body have some strong organs left to keep it alive, or is this it? You can't just look at a car or look at a person and be able to properly diagnose the problem, or the good health for...

Yesterday I kept a Diary throughout my entire process of reviewing the components of the S&P500. Many of you have written back with such nice things about that. I'm glad you enjoyed it. I think that in order to get the most out the research, it really helps to understand where I'm coming. This helps in the execution process, which is why we're here right? To make money in the market for ourselves and/or for our clients.

Today I felt that a nice supplement to yesterday's S&P500 work is a chart that shows what the S&P500 Equally weighted Index is doing relative to the S&P500 Market-cap weighted index. To me this is a good measure of whether or not we're seeing broad-based participation or if it's just the mega-cap names carrying the weight.

This post is a continuation of Diary of a Charting Session - Part 1

I get asked all the time about my process. A big question is usually around how did I find that chart in such a "random" country or asset, like an ETF on South Korea or a futures chart like Soybeans. To some people these might be assets that are not on their radar, but they are just as easy to trade as Apple shares or Crude Oil, that obviously get much more attention. My answer is simply that I look at all of them and just bring out some of my favorites. This is habit that I got into many years ago, so for me it's second nature.

With that theme in mind I thought it would be a good idea to share my diary of what it's like to go through so many charts. Sometimes I go through International Charts, other times Commodities or Currencies. On Monday I published my deep dive on the Major US Indexes and the bullish developments we're seeing. Today we are taking that one step further and going over every single S&P500 component on both weekly and daily timeframes. I have some personal additions like $TSLA and $DNKN for example, so in total that represents well over 1000 stock charts in this particular...

We've been able to avoid some short-term messy sort of action lately. We'll take it. The breadth internals of the market had been suggesting since early March that something was wrong. The major indexes breaking uptrend lines further emphasized those characteristics of distribution. Momentum putting in bearish divergences at the highs from Q4 and Q1 this year also pointed to more neutral positioning towards equities. Most of our upside targets had also been achieved by early March and that was difficult to ignore. It's a weight-of-the-evidence approach for me, there's no question.

Today we're going to make the bullish case for US Stocks. Not that I think we rip higher every day from here and we need to buy everything in sight, but I do think it's worth paying attention to the developments from early this week. I also want to pinpoint exactly what we want to see moving forward before getting full on aggressive towards US Stocks as we did in July last year and in late January before that.