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.

Below is the TIP/IEF ratio overlaid with the CRB Index:     

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This is the video recording of the December 16th Weekly Town Hall w/ Willie Delwiche

12/16/21 2:00 PM ET

From the desk of Willie Delwiche.

This week's FOMC meeting has received more than its fair share of attention. 

Many are no doubt tired of hearing about it. Some might even mentally paraphrase Thomas Jefferson (in Lin-Manuel Miranda's Hamiliton): Can we get back to prices, please?

Yes, in just a moment.

Yesterday’s headlines announced that the "Fed doubles pace of tapering". Unless you are paying close attention, this probably seems like confusing doublespeak. My friend Joe Kalish (at NDR) put it more succinctly, "Fed Turning Off Liquidity Spigot Sooner." 

The Fed will end asset purchases early next year. Based on current expectations, this will be followed by three 25 basis-point interest rate hikes over the remainder of 2022. Powell was clear to emphasize that this pivot, while compelled by higher than expected inflation, has been made possible by improving labor market conditions and strength in the overall economy. That messaging probably helped stocks shake off early weakness yesterday and rally into the close.

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...

With soaring prices across the globe, inflation is cementing itself as the topic du jour to end the year.

Bitcoin continues to appear in the conversation as the new and upgraded gold. Proponents argue that Bitcoin is the superior inflation hedge.

The simple fact of the matter is that the "Bitcoin inflation hedge" story is just another narrative that we don't see being supported with sufficient evidence.

During this morning's internal strategy session with the All Star Charts team, one theme we hit upon was that many of the stocks we want to be long have already had big runs making it irresponsible to get long here, and all the stocks we want to get short have already had big recent legs down and we don't want to chase those either!

I mean, to give you an idea, just look at the charts of healthcare ETF $XLV which is made up of many small-cap names, and $IWM -- the Russell 2000 small-cap index -- both are going in completely opposite directions! That pretty much sums up the predicament we find ourselves in right now.

It's a messy market out there!

So, naturally, we should look at companies that manage risk as their business!

From the desk of Willie Delwiche.

Key Takeaway: We have seen some evidence of fear on a shorter-term basis, but still plenty of optimism (and risk) from a longer-term positioning perspective. If we had to sum up the current sentiment backdrop with one data point it would be the AAII survey that shows even split between bears and bulls. Sentiment is neither here nor there and that leaves the door open to a more complete unwinding in optimism at a time of year when the market tends to be filled with holiday cheer. Combine that with increasing headwinds from deteriorating breadth and the trend in earnings revisions turning lower, and the sentiment shifts of 2021 look increasingly incomplete as we move toward 2022.

Sentiment Report Chart of the Week: Earnings Estimates Rolling Over

The stock market tends to do well when analysts are too pessimistic and have to chase reality higher by raising their earnings estimates. That had been the case coming off of the 2020 lows. Now, the rug is being pulled from...

We've seen a lot of chatter from the Twitterati about the Crypto Fear & Greed Index in recent weeks.

We've already made our thoughts pretty clear on the traditional CNN Fear & Greed Index and how it likely does more harm than good to investors. So, we thought we'd compare the construction of the two indexes, focusing on why the updated Crypto Fear & Greed Index does a better job quantifying investor sentiment than the CNN equivalent in the stock market.

We've already broken down the CNN Fear & Greed Index in a previous post. Here's a quick summary of how it's constructed:

• Stock Price Momentum: The S&P 500 Index (SPX) versus its 125-day moving average.
• Stock Price Strength: The number of stocks hitting 52-week highs and lows on the New York Stock Exchange.
• Stock Price Breadth: The volume of shares trading in stocks on the rise versus those declining.
• Put and Call Options: The put/call ratio, which compares the trading volume of bullish call options...

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

All eyes have been on the US dollar and interest rates in recent weeks.

Last week, we saw a timely kick save from the bond market as the 30-year reclaimed its summer lows. Whether the latest rebound in rates will hold is yet to be seen as the 10 and 30 are currently chopping sideways just above our risk levels. We’re watching the long end of the curve closely to see how yields react at these critical levels.

But what about the US dollar?

When we analyze the US Dollar Index $DXY, it’s hard to be bearish, as price is consolidating in a tight continuation pattern following a base breakout and swift leg higher last month. As usual, the direction in which the DXY resolves will have broad market implications and will affect risk assets around the globe.

We know you’re probably tired of hearing it, but this is another big week for markets -- especially the dollar!

As investors brace themselves for...

From the desk of Steve Strazza @Sstrazza

On Monday night we held our December Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the desk of Willie Delwiche.

Key Takeaways:

• Yield curve flattening in anticipation of rate hikes
• Elevated inflation usually weighs on economic growth and financial market performance
• Markets have grown unaccustomed to global interest rate hikes

Federal Reserve policy is in a period of transition and this week’s FOMC meeting will provide some clarity as to the speed with which Powell is choosing to pivot. From beginning to taper the rate at which it has continued to expand its balance sheet, to accelerating the pace of that tapering process to actually raising interest rates (likely some time in 2022), pressure is building for the Fed to fight inflation with deeds, not just words. The yield on the 10-year T-Note continuing to move sideways suggests that either inflation, if not as transitory as some had hoped, is not yet as deeply embedded as some fear or in fighting inflation the Fed will derail a recovery that remains fragile. 2-year yields are pricing in action by the Fed sooner rather than later and the spread...