Pfizer (PFE)'s announcement about a vaccine may have triggered a sharp rally on Monday, but its real effect was to boost confidence, which improved the status of a lot of different relationships that I follow, portending further gains for stocks and commodities down the road.

Swings in sentiment can be measured in many different ways, but my favorite is to assess what investors are actually doing with their money, as opposed to what they are saying.

The byproduct of an improvement in confidence is a stronger economy. Markets anticipate that, by bidding up prices for stocks and commodities, it will eventually push up bond yields. What is impressive with the current setup is that these relationships come at the problem from different angles, but are currently offering a common theme. That theme is characterized by what is affectionately known in the trade as "risk on," as the more speculative markets are slowly getting the upper hand.

Improving Credit Spreads are Bullish for Stocks

Chart 1 reflects sentiment in the bond market, utilizing the relationship between risky high-yield bonds (iBoxx High Yield Fund), the HYG, against the iShares 7-10-year Trust, the IEF. The ratio formed an initial peak last June, well before the late summer top in the S&P. It looked at the time as if a small negative divergence between the two was starting to form, on a smaller scale to that which developed in 2019 (see the two red dashed arrows). Things right now, though, are looking much stronger, as the ratio has already cleared its 200-day MA and shrugged off a potential head-and-shoulders top.

Price patterns, such as those that do not "work," are often followed by above-average price moves to the upside. Already this relationship has broken above the resistance trendline to a post-March high. All this suggests that the S&P itself will likely register a new high. Finally, note that the short-term KST for the ratio in the bottom window has just triggered a marginal buy signal.

Chart 1

It's possible that any new high ground will be achieved later rather than sooner, since Monday's action represented a bearish exhaustion day (see Chart 2). However, we should not get too hung up on these very short-term negative patterns, as they have far less power in a bull market than when they develop under the context of a primary bear.

Chart 2

Chart 3 shows a couple of other confidence relationships. The first is between the Fidelity Capital and Income Fund (FAGIX) and the Vanguard Long-Term Treasury (VUSTX). The second pits the S&P High Beta (SPHB) versus the S&P High Quality ETF (SPHQ). Both reflect similar (risk-on) action from dissimilar groups of investors.

Chart 3

Internationally, Confidence is Improving

Chart 4 addresses the problem from an international point of view, but the message is the same. It features the Dow Jones World Stock Index ($DJW) and compares it to an international credit spread between the International High Yield Bond ETF (HYXU) and the Barclays International Treasury (BWX). Once again, a rising ratio reflects improving confidence and vice versa. The green arrows tell us that important lows in the Stock Index correspond to those in the ratio. Note how the $DJW has already touched a new bull market high; this is being confirmed by similar action in the ratio. Both recently experienced false downside breakouts; typically, we would expect to see an above-average advance develop from such action. Certainly, support is coming form the two KSTs for the ratio, both of which have just gone bullish.

Chart 4

Gold is Forecasting Higher Commodity Prices

Chart 5 compares the Invesco DB Commodity ETF (DBC) to the ratio between it and the SPDR Gold Trust (GLD). When it's in a rising mode, Gold is outperforming commodities and vice versa. Paradoxically, a rising relationship means a more cautious (risk-off) attitude between these two classes of investors, as preference is given to the safe haven status of the yellow metal. This is demonstrated by the red and green arrows - green points to peaks in the ratio, red to the lows. The arrows, plotted against the DBC itself, demonstrate that ratio turning points roughly correspond with reversals in commodity prices.

Chart 5

In 2019, a violation of the two dashed trendlines signaled a bull market in the ratio and a bear market for commodities. Fast forward to the current situation and we see that the March peak in the ratio corresponded to the commodity low. That the Gold/DBC ratio has recently completed a top and violated its 200-day MA strongly suggests that the DBC will resolve its recent trading range on the upside. Note that the break in the ratio only tells us that gold is likely to underperform commodities, not necessarily that gold will fall of its own volition.

Natural Resources vs. Staples

Our final relationship under consideration is that between the more risky Goldman Sachs Natural Resource ETF (IGE) and the defensive SPDR Consumer Staples (XLP). A rising relationship indicates a risk-on (in this case inflationary) situation, while a falling one indicates a risk-off (deflationary) situation. The ratio peaked way back in 2008. The 2019-2020 period shown in the chart is just part of that decline. However, it's possible that 2020 price action marks a double bottom, though it's far too early to definitively come to such a conclusion. Nevertheless, the recent post-summer trendline violation, combined with a positive KST, suggests that the trend of improving confidence has further to run, as this relationship moves in sympathy with the others described earlier.

Chart 6

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Editor's Note: This is an updated version of an article originally published in Martin Pring's Market Roundup on Tuesday, November 10th at 9:00pm ET.

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Good luck and good charting,

Martin J. Pring

The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.

Even though the Biotech ETF (IBB) and the Biotech SPDR (XBI) represent the same industry group, their composition is very different and one is clearly outperforming the other. Nevertheless, the laggard still has a big bullish continuation pattern and this group looks bullish as a whole.

First, let's consider the differences. IBB is dominated by large-cap biotechs because the top ten holdings account for around 46%. XBI, in contrast, is more equally weighted because the top ten holdings account for just 14.5%. IBB represents large-cap biotechs, such as AMGN, GILD, REGN, VRTX, ILMN and BIIB. XBI represents the "average" biotech and the industry group as a whole.

The chart above shows XBI with a new high in October and again here in November. The chart shows three bullish consolidations and three breakouts along the way. The indicator window shows the XBI:IBB ratio moving higher since mid March and hitting a new high this month. This shows that XBI is outperforming IBB.

The next chart shows IBB with lower highs from June to October and October to November. Even though IBB is underperforming XBI, the bigger trend is up and the large triangle is viewed as a bullish continuation pattern. In other words, it is just a rest within the bigger uptrend. Moreover, a smaller bullish pattern is taking shape within the triangle. IBB surged, formed a small pennant and is making a breakout attempt.

Looking for more setups like these? Check out TrendInvestorPro.com. Each week we dissect our master chart list and group the ETFs according to trends, patterns and setups. Thursday's report includes dozens of annotated charts with commentary. Subscribers also have access to quantified trend-momentum strategies and the weekly video on Saturdays.

Click here to take your analysis to the next level!

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After the bludgeoning of the travel sector this year, it seems almost remarkable that these names could already be hitting new 52-week highs. It's not just one area, either - there are multiple areas related to travel that are hitting new highs. Destination names like Hilton (HLT), Marriott Vacations (VAC) and Vail Resorts (MTN) look very good.

Here is Hilton. The highs on these travel stocks were based on surges on Monday morning on the vaccine news. The price action has steadily been making higher lows, but was contained around the $95 level. What I'll be watching for here is for price to consolidate, but I do want to see volume start to pick up.

The next chart is Marriott Vacations. Hilton also has a vacations ticker, but the chart is not as strong as the Marriott chart. The chart above and VAC below look remarkably similar. VAC actually broke out before the vaccine data. If you have to hunker down as a family, perhaps going to a vacation property to do it is the theme.

Vail Resorts broke out to new highs. Much like the world of golf, skiing is another isolated sport that people can do in this COVID world. This chart is consolidating above the prior highs. Even though price is breaking out to higher highs, the relative strength in purple has not. New highs in relative strength can attract institutional investors.

Tis the season for skiing, and Vail resorts operates a few properties. The ski resorts around Calgary, Canada in the mountains are starting to receive snow, getting ready for the season.

EXPE and BKNG are also setting up for the increasing travel. If the markets give us a pullback, these could be nice names for the shopping list. A lot of pent-up desire out there.

I also covered off energy stocks on the Market Buzz this week, where many of the charts broke the down trends this week.

Energy Names Break The Downtrend

Have a good weekend and stay safe!

Maintaining the mindset of a serious investor takes discipline. Personally, I have found necessary motivations amongst sports analogies and metaphors. I confess — I lean on them heavily. After 30 years, I've learned that stock market profitability is a synonym for discipline.

Anyone who doubts this should read Michael Jordan's 36-page book "I Can't Accept Not Trying." Put simply, the trick is to substitute the words "trading" or "investing" every place Jordan writes "basketball". If your goal is the pursuit of excellence in the investing arena, I maintain that his basketball roadmap will get you there.

First, you must answer the most important question: how much of yourself are you willing to commit? As Michael Jordan asks, are you willing to make the emotional investment and commitment necessary to succeed? It comes down to a matter of personal importance.

For myself, I deemed it of paramount importance. Trading and investing is indeed how I express myself. A sincerely personal pledge such as this can literally transform your trading into a performance art. This ascendancy is a wondrous and deeply satisfying result. Yes, great trades can be poetic. Having said that, I'd like to paraphrase a poem that for me highlights many of the emotional and behavioral prerequisites required for consistent profitability in the stock markets. I've always imagined that if the stock market was a person, she'd be a harsh mentor.

I recently read Pastor Sarah Bourns poem titled "Exposed" about the coronavirus pandemic in New York. As with the Michael Jordan book, I've customized her message to address my personal agenda. From my perspective as an investor, I share her insights with you.

She – The Stock Market

We investors have all been exposed to the market,

indeed exposed by the market.

She's exposed our weak sides.

She's exposed our dark sides.

Exposing the layers within our souls,

hidden by the masks we wear.

 

The market has exposed our addiction to comfort,

our obsession with control, our protection of self.

She has peeled back the coverings, torn down our walls,

revealed our illusions, and leveled our best laid plans.

 

The stock market has exposed our gods, our health,

our hurry, our need for security,

our favorite lies, our misplaced trusts.

 

She has called everything into question.

What is my worth?

What is my plan without certainty?

What is my goal despite the risk?

 

The stock market exposes it all.

Your junk laid bare, your fears made known.

The band-aid torn, the masquerade over.

 

So what now? What's left?

A humbled heart.

Steady hands, clear eyes,

and hopefully a deep-seated need to pursue this excellence.

 

 

Trade well; trade with discipline!

- Gatis Roze, MBA, CMT

StockMarketMastery.com

• Author, "Tensile Trading: The 10 Essential Stages of Stock Market Mastery" (Wiley, 2016)
• Presenter of the best-selling "Tensile Trading" DVD seminar
• Presenter of the "How to Master Your Asset Allocation Profile DVD" seminar
• Developer of the Tensile Trading ChartPack for StockCharts members

Energy was the big winner this week as it gapped up on the open Monday. Since then, price has consolidated somewhat and could be forming a reverse island formation. Looking under the hood at our indicators for XLE, we have quite a few that are very overbought. The 20-EMA is on its way to a positive crossover with the 50-EMA for a "silver cross," which would generate a new IT Trend Model BUY signal. This is a powerful breakout from a bullish descending wedge and the first time we've seen price remain consistently above the 50-EMA. The PMO is positive again and rising on a BUY signal, while the RSI is positive and not yet overbought. The Energy sector still has potential to continue higher despite some of those indicators being very overbought.

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Don't miss the November 30th free DecisionPoint Trading Room! I will be joined by guest Julius de Kempenaer from RRG Research, who will show us how he uses RRG to trade!

***Click here to register for this recurring free DecisionPoint Trading Room!***

Did you miss the 9/28 trading room? Here is a link to the recording (password: FT&&l3#K). For best results, copy and paste the password to avoid typos.

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Try us out for a week with a FREE TRIAL! Simply subscribe to the "Bundle" package on DecisionPoint.com and use the coupon code: dptrial

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Now it's time for....<drum roll> THE....

DecisionPoint "Diamond of the Week"

 

Fastly, Inc. (FSLY)

 

EARNINGS: 2/18/2021 (AMC)

 

Fastly, Inc. provides real-time content delivery network services. It offers edge cloud platforms, edge software development kits (SDK), content delivery and image optimization, video and streaming, cloud security, load balancing and managed CDN. The company was founded by Artur Bergman, Simon Wistow and Gil Penchina in March 2011 and is headquartered in San Francisco, CA.

I hold a "Diamond Mine" trading room on Fridays for DP Diamonds subscribers only. This intimate trading room is a favorite of mine, as we all have become family. The symbol requests that come in from subscribers often trigger my selection for my "diamonds in the rough" and this is exactly that. My eyes popped out and I'm sure someone in the trading room heard my "wow" when it materialized on my computer screen.

This is the type of set-up I love. Momentum is swinging higher as the PMO goes in for a crossover BUY signal. The RSI is rising and is nearly in positive territory. The SCTR is in the "hot zone" above 75 (meaning it is in the top quartile among its peers). The best part, however, is the bullish double-bottom that just formed on top of the 200-EMA. Yesterday, the pattern was triggered as price broke above the confirmation line (that just so happens to line up with major overhead resistance). Today, we saw some follow-through to the upside and a move above the 20-EMA. I do note that it is down -0.49% in after-hours trading, so there likely is a better entry to be had. I set the stop at 8.5%, which lines up just below the lows in August and September.

If this type of analysis is appealing to you, join me in the free trading room on Monday. Registration links are above. Julius de Kempenaer of RRG Research will be joining me in the November 30th free trading room, so register now for this FREE recurring event.

Happy Charting! - Erin

eheim@decisionpoint.com

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Technical Analysis is a windsock, not a crystal ball.

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Helpful DecisionPoint Links:

DecisionPoint Alert Chart List

DecisionPoint Golden Cross/Silver Cross Index Chart List

DecisionPoint Sector Chart List

DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

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This past week, we saw traders turning their attention away from some of the high-flying "Stay at Home" tech stocks to some other sectors that could fare well if the recently announced COVID vaccines have the promising effect that is hoped for. We've certainly noticed the improving relative strength of industrials, as you can see in the chart below in the XLI:$SPX chart.

One of the stocks in the commercial vehicles sector that is on our "Strong Earnings ChartList" that crushed revenue and EPS expectations is AGCO. Below, you can see the relative strength of the stock versus the $DJUSHR and the SPX.

I wanted to point this out because we've got a trio of educational webinars scheduled for next week, including one on Monday, November 16 that will specifically focus on Market Rotation, which is quite timely and something everyone should be aware of. More on that in a bit.

Something else will take place next week: Monthly Options Expiration on Friday, November 20. Why is this important? Because it's likely to result in even more market volatility as Market Makers "settle up" all of the option calls and puts expiring on Friday. This can lead to some wild swings in both the major indexes as well as individual stocks, and, if you are prepared, could present some nice profit opportunities as well. Thus, we will be conducting our "Options Max Pain" webinar on Tuesday, November 17.

Finally, we're gearing up for our highly popular and much-anticipated "Top 10 Stock Picks" webinar that will take place on Thursday, November 19, when our Chief Market Strategist Tom Bowley will reveal his leading stocks in our four portfolios: Model, Aggressive, Income and Strong Accumulation/Distribution (A/D). That's 40 stocks in all. These stocks are meant to be held for a 90-day period until the next batch of stocks are revealed. As of this past Thursday, our Model portfolio alone has climbed almost 155% since its inception in November, 2018 compared to the S&P of just over 31% during the same period of time. In addition, our Strong A/D portfolio has risen 27% this past quarter compared to the S&P of 4.8% during the same timespan.

All three of the webinars we will be conducting, beginning with Market Rotation on Monday, are meant to educate traders who rely on technical analysis in their decision making. It will include combining the powerful tools of both EarningsBeats.com and StockCharts.com. If you would like to learn more about how you can register for the three events for NO COST just click on this link.

At your service,

John Hopkins

EarningsBeats.com