We’ve been on the lookout for evidence of breadth improvement and the new high lists this week have given us plenty of it. The 63-day (3-month) new high lists for small-caps and mid-caps have heated up after being dormant for most of the summer and that is starting to stretch into new highs on a 126-day (6-month) and 252-day (1-year) basis as well. On the NASDAQ we have now seen the most 52-week highs since March. I’ll let pundits talk about the impact that a drop in bond yields might be having on this and just note that new highs expanding is one of the most bullish things we can see from the stock market. When they stop expanding and start to contract is when we start to see trouble.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The outperformance from commodities this year has been hard to ignore.
Over the trailing 52 weeks, the CRB index is up over 56% and our equal-weight commodity index is up over 37%. The entire space has been participating -- energy, base metals, grains, and softs.
And even though precious metals have been trending lower since last summer, we can’t forget that gold kicked off the commodities rally by hitting new all-time highs last year.
If we’re only looking at stocks and bonds we’re cutting ourselves off from what is currently the top-performing asset class. It doesn’t matter whether we trade the markets on a more tactical timeframe or if we have a long-term investing approach. There is alpha in commodities right now and we want to have exposure.
But how do we take advantage of this space if we don’t have the ability to buy December futures contracts of Crude Oil or the March ‘22 futures contracts of Corn?
That's where our commodity ETF/ETN list comes into play.
I'm already groaning at the Dad Pun I'm trying to pull off here with this post's title.
The team put out a new The Short Report highlighting stocks that are ripe for getting short. Yes, we might be in a bull market, but its a "market of stocks" and if you look hard enough, you can always find stocks going in either direction, regardless of the macro market environment.
And the idea from the report that stands out best to me is now the victim of my bad pun.
Despite the new highs from almost all the large-cap major averages, we had yet to see new highs in their corresponding advance-decline lines.
We also hadn’t experienced the kind of expansion in participation that we’d expect to accompany the indexes to new price highs.
Our new high indicators were still muted, even on shorter timeframes.
But that was last week. This week, mid-caps and small-caps have joined their large-cap peers at new record highs after making decisive upside resolutions from their year-to-date ranges.
And guess what? We’re finally getting that breadth confirmation we were missing.
Let’s talk about it.
First, here’s a quick update on the advance-decline lines that we covered in last week's column:
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. But we don’t highlight lagging stocks on a recurring basis.
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, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.
If we're truly entering into a new crypto bull market, trend-following strategies are the only game in town.
Forget all the rotations taking place because we're entering into the "sit on your hands season."
Overtrading and getting cute is going to be punished, while just sitting on quality coins is likely to be rewarded.
Less trading.
More conviction.
Sit on your hands.
I think that's the play for crypto in the coming months, assuming the bull market is just getting started.
We're talking names like Solana, Avalanche, Luna, Algorand, Elrond, Fantom, Axie among a handful of others as well as the majors like Bitcoin and Ethereum.
In Part 2 of our Fibonacci Series we dive into Frequencies with Jim Bartelloni.
If you're already familiar with my others videos with Bart, you know this is all math. No fundamentals to see here!
In this video we look at the similarities between the shapes made by vibrating grains of sand and the ups and downs of the stock market, particularly the Small-cap Russell2000 ETF $IWM.
Key Takeaway: There’s nothing more bullish than new all-time highs, and there was plenty to go around as we reviewed our monthly charts over the weekend. It’s no wonder that optimism is resurfacing as stocks indexes up and down the cap-scale push to new records. Whether current sentiment will develop into the type of risk-seeking fervor that brought us into the year is unseen. But bulls continue to rise, and interestingly so do the bears. The AAII and II bears ticked higher last week, with II bears reaching levels not seen since May of last year. The backdrop is turning to optimism, but there's still enough pessimism among investors to keep sentiment off of the risk side of the scale.
Sentiment Report Chart of the Week: Equity Love Affair Undiminished
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
We’ve been pounding the table about rising rates for over a month now.
It’s hard not to when they're rising across the curve in both the US and abroad. Cyclical and value-oriented assets have increased in tandem, as energy and financials have become leadership groups.
We continue to see countries with heavy exposure to financials emerging from multi-decade bases. Just last month, the Euro Stoxx 600 made new all-time closing highs, while Italian equities reached their highest levels in 13 years.
But when we look further out on the curve, the long end hasn’t been keeping pace with shorter duration yields in recent weeks.
Taking a look at the 30-year beside the 10- and 5-year yields tells this story best.
