March Strategy Session: 3 Key Takeaways

March 7, 2023

From the desk of Steve Strazza @Sstrazza

We held our March Monthly Strategy Session on Monday night. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

1. Animal Spirits Are Back

One of our favorite intermarket indicators to gauge risk appetite is the ratio of consumer discretionary stocks to their consumer staples counterparts.

Discretionary stocks tend to be more cyclical and carry higher valuations than the more defensive and steady staples. Naturally, investors favor the riskier consumer stocks during bull markets, bidding up the price of discretionary stocks relative to staples.

The RCD/RHS ratio showed a positive divergence at the market bottom as it did not make a lower low when the S&P 500 did late last year.

In fact, the ratio bottomed in June and has put in a series of higher lows in the time since.

As long as RCD/RHS continues to trend higher, it will mean risk-seeking behavior among investors is perking up. In this kind of an environment, we should expect the broader market to perk up as well.

2. France Makes New All-Time Highs

Over the last four months, bullish evidence has continued to build in favor of international equities. This is particularly true when we look at Europe.

Not only is the London FTSE 100 achieving all-time highs, but France's CAC 40 Index is now following in its footsteps.

As you can see, after two decades of no progress, buyers forced an upside resolution and reclaimed a critical resistance level at the 2000 highs last month.

The fact that more and more countries are trending to the upside speaks to broadening participation overseas. The action from France supports our bullish view of equities worldwide, and reinforces our thesis of European leadership.

3. Zooming Out on Crypto

When it comes to cryptocurrencies, Bitcoin and Ethereum continue to hold above their former highs from 2017 and 2018.

There's critical information around these levels as they represent where the largest cryptos peaked during the last cycle. Here is a look at the monthly candlestick charts through February.

It can only be seen as a positive that former resistance turned into support as bulls have successfully defended these key polarity zones since last year.

As long as we're above those prior cycle highs, the structural trends are intact for the largest cryptocurrencies. While the tactical trends are still messy, 2023 has seen a good start with higher prices in both January and February.

Those are some of the main takeaways from this month’s strategy session.

Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

Those are some of the main takeaways from this month’s strategy session.

Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team