It's Saturday Morning Chartoons time.
This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.
This chart below tells a great story.
Want to know what's happening in the Stock Market? Here's a pretty good one that helps explain:
Remember, historically the S&P Industrials have the highest positive correlation with the S&P500, of all the Sectors. It's probably because it's so diversified: Airlines, Heavy Machinery, Human Resources, Railroads, Logistics Companies, Engineering, Trucks, Security & Alarm Services, Defense Companies and the list goes on.
It's no wonder that the correlations are so high. This sector is all over the place.
How this consolidations resolves is likely going to tell us a lot about the next direction for the S&P500.
Meanwhile, Emerging Markets fell to their lowest levels of 2021:
This group of stocks tends to move historically with shares of Caterpillar $CAT, one of the largest components of the S&P Industrials Sector Index, shown in the first chart above.
Here's what $CAT looks like next to $EEM:
Meanwhile, Crude Oil is still stuck below all this overhead supply and there's no evidence that it's changing any time soon:
It's hard to ignore the fact that Gold hit new 6-month highs this week relative to Copper.
Gold sucks.
And it's still been going up relative to Copper. What's that tell you?
To me, this Copper and Crude Oil weakness is something worth paying attention to. We covered it on Friday's Commodities Report.
But there's also an interest rate story here.
Copper underperforming Gold is characteristic of a falling rate environment.
And as long as 10yr Yields are below 1.4%, we've said that you have to own Treasury Bonds. I don't see any other way around it.
Notice how Bonds are working on their 5th consecutive month of gains:
US 10yr yields below 1.4% keeps us in this trade.
Although, if you're in the Options trade with us, take note of the exit strategy.
Further defensive rotation can be seen in the U.S. Dollar, which has had a very high negative correlation with risk over the past half decade.
Dollar strength has consistently been accompanied by more of a risk "off" environment, while the inverse has also been true.
Emerging Markets getting killed.
Commodities like Oil and Copper struggling.
Gold making new relative lows across the board....
These are all the hallmarks of a rising US Dollar Environment.
And finally, Utilities are breaking out to new 52-week highs:
From where I'm sitting, this is probably a healthy dose of weak rates and weak stocks.
Utilities as a defensive trade while many other areas in stocks are falling. And Utilities for fixed income investors who aren't able to get their yield in the bond market as rates are falling.
Our long Utilities trades are working, not just the ETF longs but individual Water and Electric companies.
You can find the whole list of trades here.
Below you'll find the full PDF of this week's charts:
