Ripping through charts of weekly closing prices is the usual Friday night-Saturday morning ritual for me.
Charles Dow taught us in the late 1800s that closing prices are the most important prices.
This is certainly the case on a day-to-day basis. It’s even more important on a weekly basis.
So I’ve been studying charts of weekly closing prices on Friday and Saturday for decades.
Charlie may have written down his tenets in The Wall Street Journal more than a century ago.
But I can tell you for a fact – 140 years later – he’s still absolutely correct.
A holiday-shortened week presented one of the rare circumstances where we got an early look at them.
So I’m that much more excited to share my favorite chart this morning…
The One Chart
You have the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq 100 – the Big Three way before LeBron James took his talents to South Beach.
But let’s not forget about the most important markets in the world outside of those three.
You can even argue that the German Stock Index (DAX) is just as important as the Big Three.
And – what do you know – it’s doing the exact same thing as the big three U.S. indexes.
It’s finding support at a level that used to be resistance.
Yes, polarity is in play.
But – while S&P and the other U.S. indexes have traded sideways to down since that big ripper last week.
Take a look at that green arrow – notice how European equities have continued higher.
I talk to portfolio managers who are waiting to see if the U.S. indexes can follow through to the upside.
And I tell them, “You mean like the European ones are already doing?”
They don’t know what to say. It’s obvious they’re looking in the wrong places.
It’s just easier for them to admit to themselves when I put it in that context.
Europe is the leader. That’s nothing new.
It’s just that everybody’s focused on the wrong things.
“Why should I care about Germany, JC, I live in Ohio…” And I tell them that we aren’t just Americans.
That’s especially true for you and me as investors.
We are Earthlings… let’s keep our eyes on Germany for opportunities…
This Week in Everybody’s Wrong
On Monday, I shared about one of the most incredible experiences of my life.
A lifelong sports fan, I thought I understood how special The Masters and Augusta National Golf Club are. I clearly did not.
Here’s why everybody’s wrong about The Masters and Augusta National.
On Tuesday, we talked about why a lot of commodity-related currencies are crushing the U.S. Dollar.
I saw this massive unwind coming in December – positioning was at historic extremes. And it’s happening.
Here’s why the Dollar’s collapse continues to create huge opportunities for you.
On Wednesday, we showed that Netflix (NFLX) has never been worth more than it is right now.
Pretty remarkable in this environment – it’s like a beach ball underwater.
Here’s why NFLX is getting ready to shoot up.
On Thursday, we defined “dead cat bounce” and “sucker’s rally.”
We also reiterated the key levels we’re watching on the major indexes. (They’re still holding…)
On Friday, we were greenside on No. 1 at Augusta National Golf Club again.
“You see those people over there?… Those are the people buying puts with the VIX at 50.”
Here’s why we don’t want to follow the crowd right now.
I’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs