Mosaic Chart Alerts

Market action points to a strong economic outlook.

In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup.

Here are my notes from a focus list of setups I’m monitoring.

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Stock Market Update

The capital markets are busy digesting the implications of this week’s election results. While control of the House of Representatives is still in question, Republicans have take control of the Senate along with President-elect Donald Trump back in the White House. The initial reaction across the market points to expectations for strong domestic economic growth and risk-on investor sentiment. Stocks across market capitalizations are surging higher while the U.S. Dollar Index rallies and longer-dated Treasury yields are seeing a boost. And while a stronger dollar weighed on the precious metals space, the largest cryptocurrency by market cap is building on a historic breakout. The chart below shows Bitcoin’s weekly chart going back three years, where the MACD shows that the breakout could still be in its early stages.

I’m not wading into the polarizing topic of politics. But dig a little deeper under the stock market’s hood and sector performance is sending a very positive message about the outlook following elections. I’ve already been covering bullish breakouts in key cyclical sectors that were happening before the election. That includes bank stocks and the transportation sector. And the market reaction following the election is adding to evidence that the economic outlook remains solid. Small-cap stocks in particular are finally joining large-caps in making new all-time highs. In addition to being more leveraged to the domestic economy than large-cap stocks, small-caps also outperform large-caps during the three-, six-, and 12-month period after the Federal Reserve starts cutting interest rates as you can see below.

Chart from American Century Investments

The combination of a positive economic outlook combined with an ongoing rate-cutting cycle by the Fed should provide plenty of fuel to keep the bull market intact. As long as cyclical sectors are leading the uptrend, then that bodes well for the corporate earnings picture. And over the long-run, stock prices ultimately follow earnings. The strong price action following the elections is boosting several of our open positions, and delivering new breakout trading opportunities.

Keep reading below to see our Traders Hub model portfolio of open positions and chart analysis for new trade ideas.