The week between Christmas and New Year's is a special week for me. I actually call it "Power Week", and it is basically a week-long process of taking a step back from the "flickering ticks" of day-to-day life to focus on the long-term.

Part of that annual reflection is to focus on my experiences as an investor. What went well? Where did I struggle? As my former boss used to ask, "What did you learn and what are you going to do differently?"

I believe that successful investing needs the foundation of successful routines. We spend way too much time as investors focusing on what is out of our control (what the market's going to do tomorrow) and not enough time on what is within our control (how we spend our time).

The ten questions are basically broken up into three sets of three questions. The first three relate to evaluating your performance, the next three involve how you took advantage of opportunities and the final three are on improving your routines as an investor. What about the tenth question? That one is about your mindset, in terms of how you are dealing emotionally with your first nine answers.

So here are the ten questions I ask myself as an investor at the end of every year. I'd encourage you to get out a piece of paper and write out your answers to these questions. You may be surprised at what you learn from this process!

Accountability is key here! When you're ready make a greater commitment to yourself, your portfolio, and/or your client's portfolios, consider a Market Misbehavior Premium Membership. We're ready to help you upgrade your routines, improve your decision making and keep you accountable!

So let's start with three questions to evaluate your experience as an investor in 2021.

1. How would you rate your overall performance this year?

This first question can go lots of different ways. And the way you answer this question can tell you a great deal about where you're at mentally after this year! You can give yourself a numerical rating 1-10, or just describe your performance in terms of how you experienced this year. What stands out to you as you look back on the last 12 months?

Do you find yourself focusing on big wins this year? Are you dwelling on the FOMO, or the missed opportunities on which you were unable to capitalize? Are you anxious to move on to 2022, and would rather skip this whole "let's review 2021" thing?

For me, this was a challenging year and I would subjectively grade myself as "mixed". I feel good about focusing on the evidence, particularly with the strong uptrend that persisted through much of 2021. I actually tweaked my Market Trend Model to better reflect the volatility we saw in 2021, and I feel very good about how I'm now able to better track the overall market trend on three timeframes.

2021 is one of those years where the chart of the S&P 500 appears super orderly and consistently positive. But depending on what you owned in your portfolio, small-cap stocks for example, your experience over the last 12 months definitely could have diverged from the broad market averages. I often described 2021 as a "rotational" year and, in some of the later questions we'll review what that actually meant for particular stocks and groups.

So, how would you rate your performance in 2021...?

Now on to question #2.

2. What was your best trade and why?

Hopefully, at this point in the process, you can bring out your trading journal, which you have been religiously updating all through the year! (If not, then please make your first New Year's Resolution to start a trading journal.)

Out of all of your winning trades, which one stands out for you? Which are you most proud of? Where did you feel like you had a good edge in the markets?

A big part of my toolkit is to find winning stocks by scanning for charts making new swing highs and lows. So names like Factset Research Systems (FDS), which broke out in August and kept moving higher into December, come to mind as names I'm most proud of for highlighting. Another example would be semiconductor names like NVDA, which emerged in a position of strength and were picked up in my normal review process.

What was your best trade this year? And what tools/insights/approaches/indicators/charts helped you identify that winning trade? Aim to do more of that in 2022.

Now on to the other side of the coin...

3. What was your worst trade and what did you learn from it?

As with most years, I feel like I have no shortage of tough trades to reference here. But I'll go with small caps.

I saw the Russell 2000 index break out in early November and was pretty certain this was the beginning on a new leg higher for small caps, driven by the strength in cyclical sectors, similar to what we saw in November 2020.

The breakout was short-lived, however, and the Russell 2000 came right back down into its previous range, where it remains today. That's right, the IWM is literally at the same level it was 10 months ago!

So making lots of noise about the rebirth of small caps was not my favorite moment. What I learned about this particular call was a reinforcement of the importance of risk management. When a chart breaks out, I usually start with the breakout point as a good risk level. If the price is able to break above that resistance, then hold that resistance going forward, then the chart has strong upside potential. In this case, the price quickly pulled back and failed to hold the breakout level.

What was your worst investment decision in 2021? What did you learn from it, and what are you going to do differently?

Ready to continue this special year-end journey of self-discovery? Head over to our YouTube channel!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free course on behavioral investing!

---

David Keller, CMT

Chief Market Strategist

StockCharts.com

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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

When it comes to stock market performance, it's not always about reality. Many times, perceived problems can be a bigger problem than actual problems. As we wrap up 2021 and head into 2022, there's really no denying that inflation is a problem at both the consumer and producer levels. Check out these two charts:

Core Consumer Price Index ($$CCPI):

Core Producer Price Index ($$CPPI):

Can we agree that inflation is a problem -- at least in the short-term? I mean, we're talking 20-year highs in both cases. If you understand anything about the stock market, you should understand that inflation eats into the future earnings of growth companies. So, as a result, growth companies tend to perform poorly on a relative basis when inflation is spiking. Inflation picked up steam throughout 2021 and those rising prices took a toll on the relative performance of growth stocks vs. value stocks. For purposes of this example, let's look at the small cap growth vs. value ($DJUSGS:$DJUSVS):

If you look closely, the huge move higher in the Core CPI took place during the February-to-May period in 2021. That's when growth stocks were crushed on a relative basis.

As we move into 2022, not much has changed. Inflation remains a big problem; Wall Street is taking notice and moving much more decisively into defensive areas. Over the past month, the benchmark S&P 500 has rallied strongly and set new all-time closing highs. But there's been one major change this time: defensive sectors have led the rally, and that's NEVER a good thing. Here's the performance of each of our 11 sectors over the past month:

Keep in mind that our four defensive sectors are consumer staples (XLP), real estate (XLRE), utilities (XLU) and health care (XLV). These four groups are in spots 1 through 4 over the past month. Defensive groups frequently lead when the stock market is weak, but rarely do they lead when the stock market is strong. Wall Street is losing confidence in this bull market rally.....and so should we.

I believe this is setting up for a very difficult period ahead. How difficult will it be? Well, I plan to discuss that very topic at our Market Vision 2022 event on Saturday, January 8th, 2022. This event will be FREE to all EarningsBeats.com members -- even 30-day free trial members. Last January, I boldly predicted that the S&P 500 would finish this year at 4750, 1000 points higher than the 3756 close on December 31, 2020. Given COVID, there weren't many analysts calling for nearly a 30% advance in the S&P 500. Yet where did we close on Friday? 4766, just 16 points away from the level I suggested one year ago. I see an absolutely WILD 2022 ahead. It will be very important to protect your capital throughout much of 2022 and I'll discuss how to do that next Saturday. To claim your seat and attend Market Vision 2022, it's very simple: just CLICK HERE and sign up for a FREE 30-day trial. We'll send out room instructions to all EarningsBeats.com members next Saturday. If you cannot attend the event LIVE, no worries. We'll record the event and send a copy of the recording to all EarningsBeats.com member to review at your leisure.

 

Happy New Year to everyone and, as always, happy trading!

Tom

Here we are, on the last day of the year, writing my last ChartWatchers newsletter contribution for 2021.

By the time you are reading this, it will be 2022. So let me kick off by...

wishing you a very happy and above all healthy new year!!

Given the situation the world is in at the moment, things can get a lot better in a lot of areas!!

Of course, I have been thinking about some New Year's resolutions with regard to the RRG charts, the RRG blog, and Sector Spotlight. I don't think any of these are "broken", so we don't have to "fix" anything. But we can always try to improve.

One of the things I am really looking forward to is working with the dev team at StockCharts.com, both to add new features and generally improve the RRG charting capabilities both on SharpCharts and bringing RRG to ACP. We have a ton of ideas!!

On the content side (blog and video) I am thinking of having more "structural" segments. In Sector Spotlight, there are a few, like the seasonality segment I do every last Tuesday of the month and the monthly charts that I talk about every first Tuesday of the month. But I believe there can be more of those. Maybe as simple as maintaining a table with "+ / = / -" per sector at the end of each episode of Sector Spotlight or setting up a public chartlist for that. And/or break that down to groups -- and maybe even stocks as well.

The biggest problem, probably, will be to keep up with the writing. Finding and researching all the sectors, groups and stocks is one thing, but writing an article or presenting them in Sector Spotlight on the how, why and what takes up a lot of time. So I need to find a way that balances out getting interesting content and findings in a more structural way without getting boring for readers of the blogs and watchers of the show.

Another one of my plans is to write a "living article" that is essentially an inventory of more educational (parts of ) blog articles and SSL (and other videos). This will also be an investment for me, as many emails that I receive are related to "where can I find more info on .....?" Being able to refer to an article that lists all, or at least a lot, of resources will be a time saver!!

I'm sure we'll get there and if you have any brilliant ideas... just let me know.

Stocks Remain Strong

Going into the new year, the rotation for stocks (ITOT) on the Relative Rotation Graph for asset classes remains positive.

Looking at the RRG above, we find stocks inside the leading quadrant at a very short tail. That means that a stable (short tail) relative uptrend (right-hand side of the graph) is still in play. The opposite is found for Government bonds (GOVT), as well as the other fixed-income related asset classes (HYG, LQD) on the left-hand side of the graph.

If we zoom in and blow up the rotation for ITOT and GOVT, we can see a slight weakening for ITOT and improvement for GOVT over the last few weeks. At the moment, that does not change the preference for stocks over bonds. As a matter of fact, plotting the same ETFs on a daily RRG already shows renewed strength for ITOT vs GOVT.

The outright comparison between stocks and bonds in the graph above shows the recent improvement for stocks, as the ratio just jumped away from a small correction, which brought it down to the lower boundary of the rising channel that was in play for most of 2021.

Breaking convincingly above its previous high will very likely set the stage for the first few weeks of 2022.

#StaySafe, --Julius

My regular blog is the RRG Charts blog. If you would like to receive a notification when a new article is published there, "Subscribe" with your email address.

As 2021 winds down, gold prices are starting to perk up again a little bit. But this very slight rise is still not having any effect on the public's willingness to own gold bullion ETFs.

This week's chart shows the combined assets of GLD and IAU, the two largest of the ETFs which hold gold bullion to back their shares. Assets in these two ETFs tend to rise and fall in sympathy with gold prices, which makes sense. There is nothing like rising prices to get more people excited and wanting to participate. Conversely, falling prices cause people to flee.

These data get really fun when we see investor behavior that is not explained by price action, i.e. still buying after a price top or still selling after a bottom. That behavior indicates a more organic and lasting form of investor sentiment, which suggests that the price move has further to run before it starts turning people's hearts.

Right now, gold is moving up slightly, but the total assets of the two funds combined is the lowest since April 2020. The public is not believing in the up move by gold prices, which of course makes that move more legitimate.

In one of the greatest stock rallies ever, 2021 will go up in history as an easy market to make money. The chart opened on the lows, closed on the highs and never had a 10% pullback. What could be easier?

For all charts below, the scale on the left is in percent gain, while the scale on the right is the actual price currently.

The Nasdaq 100 (QQQ) was also a strong chart.

Across different mediums, chatting with friends, family, clients and traders, this year had one of the wildest results, oddly. Hedge funds, overall, didn't do too well. They were too pessimistic. If they held short positions to smooth out the trend, they got killed.

Retail investors who had professional portfolio managers were up 25%, which is an awesome return. This is the median return.

Tech investors had a wild year. The XLK looks smooth, but varying areas of tech were all over the map.

What worked great last year got killed this year. Peloton (PTON) and Zoom (ZM) were hard hit.

The Nasdaq kept climbing, and it was led by large-cap tech. I saw some chart crime out there, where chartists failed in using the right parameters to compare two different charts.

The background is different so you realize this is a different scale for this chart. This is XLK (red) in percent gain where, the bigger the company value, the larger the weight. The second chart line is RYT (black) in percent gain, which gives each company the same weight. The third line is RYT (green) price.

In this example, I have used percentage scale on the right, which shows the XLK outperforming the equal weight by 20% (36% compared to 30%). The green line is the price of RYT and it gets stretched to look the same as XLK. Make sure to compare percentage returns, not chart shapes! If I just put both charts on a regular chart, the computer will stretch both charts to reach the bottom and the top.

I want to explain this, because this chart is floating around Twitter saying the XLK performed the same as RYT. Compare the red and black (both percent charts), not the green one.

For the first time in a while, energy traders had a good year. The more conviction, the higher the profits. Heading out of the year with a 75% gain!

Gold investors watched as the world passed them by.

Industrial metals investors did pretty well. Copper was in line with the average portfolio.

Agricultural commodities had a great year.

I read a Twitter thread with traders talking about what they could have done better. What I found interesting was that, even though energy was a top performer, the traders couldn't leave the tried and true. They got stuck in SPAC mania, they got stuck in biotech, they got stuck in electric vehicles, they got stuck in payment systems, they got stuck in renewable energy, they got stuck in vaccine names. Here are some of the charts.

IPO shows the new listings. SPAC's were a big part of this. Note the drop from February SPAC-mania.

Biotech (IBB):

Electric Vehicles like NKLA hurt investors.

Lucid (LCID) was one of the better ones, depending on your entry.

Paypal (PYPL):

Renewable Energy:

Lastly, Moderna (MRNA). Depending on your entry, it could have been great. But your exit was important too. Even though COVID/Omicron is raging, the stock can't rally. Giving back 50% since August is hard.

It wasn't all bad. Semiconductors continued to deliver. NVDA was great! Lots of names just hit new highs.

I do want to conclude by saying it has been a massive run since the lows of 2020.

140% for the Nasdaq 100:

115% for the SPY:

Through it all, it has been a huge run. Hopefully your portfolio has been enriched!

That's a wrap on 2021. Best wishes for a great year ahead!