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.
Clues From Consumers
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
Outside of the large-cap averages in the US, most stocks have been stuck in sideways trends for much of 2021. We’ve seen breakouts fail in both directions over the past two months, as sloppy price action continues to govern the broader market.
As we discussed in our last intermarket post, this range-bound action has not just been the case for stocks on an absolute basis. We’re seeing the same thing from commodities, cryptocurrencies, and even our risk-appetite ratios. Risk assets have simply been a mess.
Let’s take a look at one of our favorite risk-appetite ratios, as there’s been an important development in the discretionary versus staples relationship.
The Weakest Link
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Not unlike the major US equity indexes, the commodity space is still range-bound as we head into year-end.
When we compare the trailing 12-month returns of individual groups, we get a sense of how bifurcated the commodity market has been. Another thing that stands out is just how weak precious metals have been relative to their peers.
While the rest of the asset class has posted solid gains on the year, gold and silver continue to trend lower. If this is truly a commodities supercycle, we’d expect to see some participation from this group. And, considering they’ve been in a downtrend for almost 18-months now as the rest of the space has been working, we’d expect it to happen soon.
Let’s take a closer look at what’s going on with these shiny rocks. [Read more…]
The Hall of Famers (12-17-2021)
From the desk of Steve Strazza @Sstrazza
Our Hall of Famers list is composed of the 100 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that. Check it out here.
The Hall of Famers is simple.
We take our list of 100 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
[Options Premium] Broadly Communicating Higher
The wild ride in the stock markets this week is nothing if not revealing to us where the relative strength is hidden!
There’s always a silver lining to volatility. The vulnerable stocks get exposed, the weak hands get shaken out, and what we’re often left with is a pretty clear picture of where the strength is and which names are likely to lead us higher when things calm back down.
With this in mind, today’s trade comes from the latest Under the Hood Report.
[Video] Options Trade of the Week w/ Sean & JC | Risking Capital In A Risk Manager
We have a new Options trade up this week.
We’re buying an $MMC April 170/200 Bull Call Spread for around a $7.50 debit all in. This means we’re long the 170 calls and short an equal amount of 200 calls..
Check out our short video with the thought process behind these trades: [Read more…]
Prospects of Inflation Cool
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
It was only a month ago that we discussed the TIPS versus Treasuries ratio hitting its highest level since 2013 as investors prepared for rising inflation.
Fast-forward to today, and the inflationary backdrop looks very different.
Inflation breakeven and forward expectation rates have rolled over aggressively since the middle of November. This is illustrated by the TIP/IEF ratio, which recently undercut its May highs. Combine this action with the lack of follow-through on last week’s kick save from the 30-year yield, and the prospects of rates rising across the curve aren’t looking too hot.
But what does that mean for risk assets?
For starters, commodities will miss out on all the usual tailwinds that come with inflationary pressure. Let’s take a look at a chart that highlights that relationship.
The Short Report (12-16-2021)
From the desk of Steve Strazza @Sstrazza
When investing in the stock market, we always want to approach it as a market of stocks.
Regardless of the environment, there are always stocks showing leadership and trending higher.
We may have to look harder to identify them depending on current market conditions… but there are always stocks that are going up.
The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too.
We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club. We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics.
Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports. Now, we’re also highlighting lagging stocks on a recurring basis.
Welcome to the Short Report.
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