During our members-only conference call and our trade management post we discussed why a more neutral approach is best as we identify whether equities are going to consolidate at higher levels or begin to roll over again. We also discussed the importance of taking some profits quickly in an environment that produces whipsaws in both directions.

Over the last two weeks we've seen a number of our long ideas failing and more of our short ideas working, suggesting that lower prices are likely ahead in the short-term and that we should continue to err on the short side of stocks. This post will outline some of the evidence we're seeing supporting this thesis, as well as adding a number of short ideas to our trade list from October and November.

From the desk of Tom Bruni @BruniCharting

Over the last few weeks we've looked at signs of rising stress in the credit market, interesting relative strength in bond prices, and a trade on the long side in treasury bonds, but today I want to take a comprehensive look at the bond market and highlight what it's signaling for rates and risk appetite in general.

Frank Cappelleri is one of my favorite guys to listen to. He brings a unique perspective because of a lot of his experience on Wall Street. Early in his career he spent time working at Smith Barney with legends Alan Shaw and Louise Yamada. He then experienced his first bear market after March 2000 working with former Lehman trader John Schlitz. Frank has been at Instinet, which is owned by Nomura, for a long time and is constantly in touch with some of the smartest guys in the business. I think he's as good a technician as anyone and in this episode he shows us just that. We discuss the market implications of a rising US Dollar and why he no longer has a target above 3050 for the S&P500. I was really looking forward to this conversation and we're lucky we get to pick his brain for a bit. I hope you enjoy this one!

From the desk of Tom Bruni @BruniCharting

Interest rates are on the move, with the Ten-Year Treasury Yield breaking 3% once again after working off its failed breakout attempt from May. One relationship that's highly correlated with the Ten-Year Yield is Regional Banks vs REITS. We've written about this relationship in 2016 and 2017, but it's at an important inflection point so today's chart is going to revisit it.

I'm not the kind of guy that likes to give funny names to price patterns in the market. For me, it's more about the implications of that market behavior and less about what we call it. Today I want to take a look at US Treasury Bonds and what some price observers might refer to as a 'Head & Shoulders Top'.

The reason this is a popular pattern is because, as humans, it is easy for us to identify and relate to. Each of us have a pair of shoulders and a head that stands in between and above them. In today's chart, the Head and 2 Shoulders are fairly easy to point out. We're looking at the US Treasury Bond ETF $TLT:

This is the most valuable analysis I do every month. When you sit there with some music on and just rip through monthly charts, it really gives you perspective. We're taking a step back and reanalyzing the trends. It's easy to get caught in the day-to-day noise. This exercise helps avoid getting whipped around. I encourage everyone to make their own list of Monthly Candles.

As homo sapiens we're hard wired to feel the need to gossip. This goes back hundreds of thousands of years throughout evolution. We still see it today and through the speed of communication technology, that gossip gets amplified. While some would argue the issues of today's society are unique, anyone who studies history knows that none of what we're seeing today is new.

It's our job as investors to be aware of this cognitive behavior flaw and work on avoiding the potentially disastrous implications of allowing our evolutionary gossip habits to enter into our portfolio decision making process. I've seen some amazing technicians and traders let their political opinions get in the way of their "process" and watched their horrible downfall. It's been heart wrenching to watch, but the lessons learned by witnessing their collapse is something that will stay with me forever.

The current political and economic environment is unique in it's own way, but they always are. Rather than focusing on the noise, I've found it extremely valuable to pay attention to the only thing that actually pays us: price.

If you've been following along, I try and go out of my way to discuss risk management techniques, tools and signals when the market gives them to us. Whenever I lay out a thesis, I like to talk about what the market should look like in the case that we are correct, while at the same time outlining what the environment would look like if we are wrong. The idea is to picture both scenarios and as the data comes in, try to identify which outcome we're in as quickly as possible.

It's amazing how many people in this world completely ignore monthly charts. I never understood it. It's an exercise that only needs to be done once a month. It's not like eating healthy or working out that you have to do it consistently for it to work. This is 30 minutes per month! 30 minutes! 12 times a year. That's 6 hours of work that will be the most important and productive 6 hours of the entire year. Even if you have a short-term time horizon, all of these shorter-term trends come within the context of a much larger structural picture.

This weekend was our second annual Chart Summit. I still can't believe all the amazing feedback that continues to come in after this event. Thank you all from the bottom of my heart, both the presenters and the audience members. I didn't think we could make something even better than the original, but I think based on the responses, we may have actually pulled it off. Wow!

Our video production folks are hard at work putting all the videos together, but I've picked out the ones I did so I can share with all of you as soon as possible. The rest will be out this week.