The Value Line Geometric Index has moved from new high to below its 10-week average in the space of a week. Momentum has peaked and is moving lower. [Read more…]
[PLUS] Weekly Sentiment Report
From the desk of Willie Delwiche.
Key takeaway: Last week’s volatility unwound some near-term complacency, but there is still plenty of evidence of optimism in the system. Active managers increased their equity exposure and equity ETFs continue to attract inflows at a staggering pace (though certain sectors are starting to see outflows). A more challenging breadth backdrop poses a challenge, but with economic data continuing to surprise to the upside and earnings expectations being revised higher, excessive optimism may be slow to unwind. While risks are elevated from a sentiment perspective, they are not yet being manifested in terms of price.
Sentiment Report Chart of the Week: Large Tech Outflows
Outflows among tech stocks spiked to their highest level since early 2019. The recent spike comes after historic inflows and speculative exuberance took hold of the market. Now the market environment is portrayed by waning trading volume and a sharp decline in call option activity. We may be in the early stages of sustained outflows if sentiment experiences a full unwind.
[PLUS] Weekly Market Notes & Breadth Trends
From the desk of Willie Delwiche.
- Last week’s volatility produced a shake-up in our relative strength rankings. Materials and Financials both saw big drops, while Technology and Communication Services surged into the lead.
- Looking beyond the cap-weighted S&P 500 sectors shows a less decisive shift in leadership – Energy & Real Estate remain strong, both at the sector level and in terms of the industry group heat map.
[PLUS] Weekly Observations & One Chart for the Weekend
From the desk of Willie Delwiche.
As the weight of the evidence has shifted from bullish to neutral in the first half of 2021, active investors can find more solace in moving to the sidelines and holding on to a little more cash. This week may have intensified that feeling. Commodities suddenly seem bidless, the S&P 500 has moved from an all-time high to testing its 50-day average over the course of a week, and bonds sold off then reversed course, sending the yield on the 10-year T-Note to its lowest level since early March. Dramatic moves across stocks, bonds and commodities this week can obscure the trends that have emerged over the past six months. Commodities & stocks have been strong and bonds have been weak. That may very well change as we move into the second half, but let’s not overlook the path that has gotten us to where we are this year. So with just a handful of trading sessions to go in the first half, we still have the broad commodity ETF up 27% YTD, with SPY still carrying a double-digit gain and AGG still in negative territory.
[Crypto] Weekly Strategy Session – June 18, 2021
This is the video recording of our June 18, 2021 All Star Charts Crypto Weekly Strategy Session.
[Plus] Weekly Town Hall Meeting w/ Willie Delwiche
This is the video recording of the June 17th Town Hall Meeting w/ Willie Delwiche
06/17/21 2PM ET [Read more…]
Breadth Thrusts & Bread Crusts: How to Refocus on Your Financial Health
From the desk of Willie Delwiche.
I planned on writing about how fishing is a great metaphor for investing.
But I’ll have to tackle that idea another day.
Today, I’m thinking about fishing not as a metaphor for investing, but as a metaphor for not investing — actively stepping away to preserve financial capital. Perhaps even more importantly, stepping away to rebuild mental capital.
Whether it’s casting for trout in Oregon or trolling for salmon in Lake Michigan, getting away from our screens and electronic gadgets and connecting with the water is clarifying and restorative. It’s not just about the catch…
Beyond fishing, it’s important to cultivate places where we can get away from it all, even if for just a few moments. We need to find places where we can set aside the active wrestling with trends and troubles. Places where we can catch our breath, clarify our thoughts, and reinvigorate our souls.
[PLUS] Weekly Macro Perspectives – Fewer Tailwinds, With Headwinds On The Horizon
- Breadth thrust regime from last year has expired
- Higher inflation and unbalanced asset allocations can weigh on stocks
- Global earnings revisions trends remain healthy
2020 was a remarkable year in many ways. The rally that emerged off of the early year lows was broad-based and historically strong. It was fueled by numerous momentum surges, overwhelming amounts of fiscal and monetary liquidity, an unprecedented string of better than expected economic data, and a persistent trend in earnings estimates being revised higher. While 2021 began with some of those tailwinds intact, as we move toward the second half of the year, we want to avoid the assumption that nothing has changed as we have entered year two of the cyclical rally.
Breadth thrusts can signal strong and sustainable upward momentum for stocks that can last for up to a year. Our two favorite indicators are having 90% of stocks above their 50-day averages and/or 55% of stocks at new 20-day highs. These indicators last sent signals in late May and early June last year, and the breadth thrust regime from those signals has now expired. All of the net gains for the S&P 500 since 2010 have come during breadth thrust regimes. The path forward could remain rocky without another round of breadth thrusts.
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