We've been highlighting the relative strength of certain Gas names in the Energy space since August, and they've worked wonders on the long side.

Although we've issued several tactical updates since then (December and January), I wanted to use today as an opportunity to revisit this thesis and update our approach given many of our price objectives have been hit.

The Fast Moving Consumer Goods Index continues to chop around, but there remains an opportunity in many individual index components on the long side (while avoiding the weak ones).

There is a lot going on in the market right now, not just in the U.S. but globally. The intermarket relationships between Bonds, Gold and the US Dollar are having a major impact on equities.

January is a month that gives us a lot more information than most other months throughout the year. We have the data now that we can use to help us identify primary trends.

Volatility is picking up. Daily swings are getting larger. I’ve seen this story before.

We discuss all of this and a lot more.

This is the video recording of the February 2020 Conference Call.

*NOTE: This Post and Video was originally intended for Premium Members of Allstarcharts Only. But due to the circumstances, we have unlocked it for everyone to watch and download the slides. We feel this can be used for educational purposes moving forward. Thank you for understanding.

This has already been a market environment the past few weeks where we've wanted to be selling Emerging Markets. But today we're getting more specific into Latin America and shorting Mecradolibre $MELI.

Remember, like every other stock we discuss, 95% of the reasons why we're choosing this stock has nothing to do with the chart of the stock itself. It's the other 4,999 charts we look at every week that collectively point to buying or selling a particular security. In this case, we're already sellers of Emerging Markets. The data suggests Latin America is one of the weaker links within EM, and $MELI just provides a clean risk vs reward to express this thesis.

Here is the chart showing Mecradolibre failing once again near this 677 level that has been trouble since last year. There is clearly still an overwhelming amount of supply here. The bet is that $MELI gets back down to 517, which would put it near the lower end of this multi-year range:

This week I sat down with Irusha Peiris of Investor's Business Daily to talk markets and life lessons.

I was invited on to the Investing with IBD Podcast where we discussed the current market environment, including US and International equities. We talked about interest rates and their intermarket relationships with other asset classes like currencies and commodities. Most importantly, in my opinion, I lay out 4 very critical levels, in 4 indexes specifically, that I think will be the biggest hurdles to jump over in order for stocks to continue higher.

This was a fun conversation.

Here's the interview in full:

The trend for emerging markets outperformance is down. It's very much down.

We caught a nice rally in EM last year on absolute terms, but we’ve wanted to be selling those stocks for a few weeks now.

I'm in the process of preparing for our Live Monthly Conference Call this Monday evening. Going through all of the data, this is one chart that definitely stands out.

Emerging Markets are hitting the lowest levels relative to the S&P500 since 2003! 

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...

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:

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?