There was a major reshuffling of sector performance rankings last week, and as always, the story is even bigger than what makes headlines. None of the changes in the ranking warn of imminent doom, but it does increase my suspicions that the market could peak around the election. The best way to handle volatility is to be prepared for it. Let’s take a look at the market’s updated box score… Low-Rate Sectors Find Bid Real estate popped to claim the one-week leader position, which is interesting given the recent uptick in interest rates we saw. If you’ve been following along in Theo’s chatroom, you’ll know that I’m looking for an important low in bonds, or a high in rates. If it’s not happening now, I expect it no later than January.  A rebound in bonds would be a major tailwind for both utilities, which are the new leader year-to-date and

Stocks continued their bid this week and breakouts are happening left and right. Sentiment is growing increasingly bullish as traders and investors see their portfolios hit new all-time highs with the market. I still think this bull market has legs, but with the election less than three weeks away now, I’m urging you to not get greedy and stay true to our risk management principles. In the meantime, I wanted to update you on what I’ve been up to in this market. Take a look… Capturing Profits Is Managing Risk If you’ve been following my trade strategy for any period of time, you’ve probably noticed that a big part of my process is capturing initial profits when upside price targets are reached. This is the case in over 80% of my trades. Have a look at some recent examples in names like PI, VST, and SATS: Why do I do

Last week, I sent over a letter asking if you were ready for the New Economic Era. I asked you to drop me a note if you were interested, and a fair number of you found your way into my inbox. But since I feel so strongly about this emerging “Trinity Trade,” I wanted to give you another chance to consider this generational opportunity that’s still in its very early stages. In fact, I can even tell you that governments around the world will be directly involved in this trend. It’s no longer a question of free market innovation.  Let’s take a deeper look…  The Emerging Economic Arms Race Before the age of free trade came to be, one of the primary ways countries grew their economy was through war or conquest. Thousands of years ago, it was an agricultural revolution that helped nations get the upper hand on their

On Friday, I put a tease out there – that you would be pleased with the updated results in the sector performance rankings. And now that it’s Monday, it’s time to follow up with the Tale of the Tape. We’re seeing capital flow into the right areas of the market now, which signals that the current rally has legs. Don’t forget that, from a seasonal standpoint, we’re about to enter one of the more bullish periods of the year.  Based on what I’m seeing under the surface, there is some real potential for this rally to be one for the record books… It’s Still Early For Technology A quick glance at the updated performance rankings has technology as the top-performing sector on both one-week and 30-day intervals.  I’m going to say this as plainly as possible: This is the most bullish development we’ve had in weeks. Tech is the largest

The big headline this past week on the economic front was the uptick in the September CPI report. The beat was subtle, only 0.1% above estimates, so I think it’s still too early to come to concrete conclusions. That being said, I do think inflation will become a problem again… just not yet. In my view, this has to do with the oil market, which remains range-bound. Unless crude oil starts surging higher, I don’t expect there to be a meaningful uptick in inflationary pressures. The big question, of course, is how stocks would handle such a macroeconomic development. Let’s discuss this further…  The Real Correlation Between Stocks and Inflation I want to set the record straight on the relationship between stocks and inflation. Have a look at this long-term S&P chart below, which also includes the correlation with the CPI index on the lower part of the chart. The

If you had the power to know the future, would you seize it? I’m not saying that I, or anyone else that I know does, but I would venture to say that markets are the closest thing to a crystal ball that we have, assuming you know how to read them properly. If you can believe it, we’re already almost through the first-half of this decade, and in many ways, the world is unrecognizable from 5-years ago. I would even go as far as to say the world changed more in the last 5-years than it did in the previous 10-years. Such is the nature of change, and by studying markets, we’re able to witness it occur in real-time. Over the past couple of months, I started seriously tracking what I’m calling the “New Era Trinity Trade.” You’ve definitely heard about these themes independently, and perhaps in a pair, but

Over the past few weeks, I’ve been adamant that the Fed is playing a dangerous game on the inflation front. Starting another round of money printing before long-term inflation targets have been achieved isn’t just reckless, but borderline negligent. So, I’m not surprised to see that an inflationary sector led the market again last week. It’s not a full blown “head for cover” alert, but rather a signal that storm clouds are gathering on the horizon.  Have a look… The Fed Poured Gas on the Inflationary Coals After being overtaken by basic materials (XLB) the previous week, energy (XLE) was right back in the one-week leadership spot in the sector performance rankings. This means that the last three weeks has seen inflation-related sectors emerge in the one-week leadership roles. This reinforces the notion that the Fed is pouring gas on the coals of inflation. If enough embers remain, it could

The world’s reserve currency has staged a major rebound in recent weeks after declining since mid-April. During this time, stocks continued their bull market, while bonds rallied to multi-month highs. As the largest and most liquid market in the world, the currency market significantly influences all others – stocks, bonds, cryptocurrencies, and commodities. This raises the question: Does a shift in the Dollar’s behavior threaten the stock bull market? Possibly, but not necessarily.  Let’s explore further… Capital is Never Created or Destroyed Imagine global markets as a water tank, with money as the water. It flows to areas of least resistance, driven by economic incentives. Every market’s behavior must be understood through the lens of currency. A stock market rally coupled with a falling local currency signals an inflationary rally. Conversely, a stock market rallying alongside its local currency indicates net global demand for those equities. The latter scenario describes

As the market settles into the Fed’s new round of monetary stimulus, I’ve been warning that a return of inflation cannot be ruled out in the near future. Last week, I noted how the energy sector (XLE) perked up and claimed the one-week leadership position in the sector performance rankings. But this week, there’s another new leader in the sector performance rankings. And guess what? It’s another inflationary sector.  Check this out, because the Fed continues to play a dangerous game, and we need to be ready…  More Fodder for Higher Prices The new one-week sector leader is basic materials (XLB). This is another sector that makes up part of what I like to call the “inflation trade.” The others include energy, industrials, and sometimes, even consumer staples. This makes it two weeks in a row now that we’ve had an inflation-related sector gather momentum. Note the timing of this

One of the biggest headlines in markets this week was what transpired with the Chinese equity market. We’ve seen stimulus after stimulus over the past couple of years on behalf of both the People’s Bank of China and the Chinese government, so what makes this round so special? The spoiler is that there isn’t anything special about this new round of stimulus. On the contrary, I think it has a lot more to do with the Fed’s policy decisions as of late. But as I’m about to show you, the trend of China’s underperformance against U.S. stocks has been going on for years. The trillion-dollar question now is whether we’ve reached a key inflection point… Capital Flows Never Lie In markets, it’s critical to separate narrative from reality, lest you get burned. For years, we’ve been lectured about how China was going to become the global economic superpower, and to