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[PLUS] July Monthly Playbook: Trends, Opportunities, Risks

July 7, 2022

From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

In Focus for July: We move into the third quarter, with many hoping for a respite from the environment that produced the worst first half of a year for balanced portfolios since the 1930’s. With 1% daily swings in the S&P 500 running at twice their historical rate (to the point that they have been the norm rather than the exception this year), leaning on price movements alone as evidence of improvement may be trickier than normal. The absence of an underlying breadth thrust regime has weighed heavily on equities. In the absence of such a signal, we want to see a combination of better breadth, liquidity and macro sentiment before thinking less...

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US Dollar Dominates

July 7, 2022

From the desk of Ian Culley @IanCulley

The US dollar has answered any and all questions about its strength over the past few months.

During Tuesday's session, there was no place to hide, as King Dollar continued the Fourth of July celebrations, putting on its own fireworks display. 

It lit up every currency on the board as major forex pairs continue to go down in flames. 

Two that stood out were the EUR/USD and the GBP/USD.

Yes, these crosses have been trending lower since the beginning of the year. But with the critical levels that broke yesterday, we're anticipating fresh downside legs and prolonged dollar dominance.

Let’s take a look.

Here’s a chart of the EUR/USD:

On Tuesday, the euro decisively broke down to its lowest level in almost two decades. 

Given its majority composition of the...

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2 to 100 Club

2 to 100 Club (07-06-2022)

July 7, 2022

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn't just end there.

We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during...

[PLUS] Dynamic Portfolio Management

July 6, 2022

From the desk of Willie Delwiche.

A new quarter brings new positioning for our strategic portfolio, tilting away from equities, taking a fresh look at bonds and trimming up our commodity exposure. Recent strength in bonds has adjusting our fixed income exposure in the cyclical and yield portfolios and adding it to the tactical portfolio. While comfortable limiting our risk exposure for now, we also want to lean toward where the evidence suggests the market is heading.

[PLUS] Weekly Sentiment Report

July 6, 2022

From the desk of Willie Delwiche.

Key Takeaway: Flow data showing equities attracting 71 cents of every ETF dollar in the first half of 2022 casts some doubt on claims that sentiment is washed out even as bears continue to outnumber bulls. New lows > new highs and excessive pessimism are features of bear markets, while new highs > new lows and building optimism tend to be seen in bull markets. The wall of worry seen in the AAII sentiment data off of the COVID lows is more an exception than it is a rule, especially in the absence of breadth thrusts or other evidence of strong participation. Between the ETF flow data and measures of household asset allocations, the risk is that the investor love affair with equities grows cold and they seek solace elsewhere. Overall the sentiment data now looks more similar to what was seen in Q1 2008 than what was seen at the lows a year later.

Sentiment Report Chart of the Week: Equities Feel The Flow

Discussions of sentiment often focus only on what investors say...

[Options] Cigna $CI Offers a Great Setup and Relative Strength

July 6, 2022

On both an absolute and a relative basis, healthcare names continue to perform. I guess the need for quality healthcare is a stronger driver of stock prices than interest rates and global macro? At least for now, that appears to be the case.

One name we've been watching, Cigna $CI, is knocking on the door of a major base breakout.