Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the context of the big picture and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Key Levels Stay In Play
With more deterioration and choppy action taking place recently, bears are looking at yet another chance to take control. Many critical areas are near the lower end of their respective ranges and once again on breakdown watch.
The rationale is very simple. If bears can’t get it done with all these areas looking increasingly vulnerable right now, it will further enforce the lack of power we’ve seen from sellers in this environment.
If buyers can step in and defend these critical levels in small-caps, regional banks, and copper miners once again, it’s hard to imagine the world is coming to an end. In fact, it would prove incredibly constructive, and would be a new set of data points on the side of the bulls.
This week we’re looking for a long setup in the Consumer Goods Sector. FMCG is a defensive sector and tends to outperform the market in a broadly weak environment.
Stocks in the U.S. and around the world, Interest Rates both domestic and global, Commodities, Currencies and an infinite amount of Intermarket Relationships that help us identify trends across assets.
Price is what pays. Not just around here, but also for you reading this, as well as every other investor on the planet.
Nothing else is going to pay you.
So when it comes to "What is the best Technical Indicator?"
The answer is Price.
Now, in order to supplement our price analysis, we include things like Momentum and Breadth studies, Relative Strength, Sentiment, Seasonality, Volatility and a bunch of new tools and strategies that we continue to develop as markets evolve over time.
Sentiment can be a tricky one.
I think anyone who has been in markets for a while would agree.
The short answer is that there is NO single sentiment indicator that will tell you when to buy or sell stocks, or any other asset class for that matter.
Where Sentiment really stands out to me is when it is at a historic extreme, which by definition, is not very often.
We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
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.
This chart below tells a great story.
Want to know what's happening in the Stock Market? Here's a pretty good one that helps explain:
Remember, historically the S&P Industrials have the highest positive correlation with the S&P500, of all the Sectors. It's probably because it's so diversified: Airlines, Heavy Machinery, Human Resources, Railroads, Logistics Companies, Engineering, Trucks, Security & Alarm Services, Defense Companies and the list goes on.
This could have been disaster for the Stock Market, but instead it's just more of the same: A Hot Hot Mess.
I think a great way to explain what happened this week is with the Equally-weighted S&P500. Remember, this version of the index is not heavily weighted towards those monster companies.
This index gives an equal weighting to each of the components:
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
It’s been a routine hurricane season down here so far this year. Things have picked up lately, and we’ve had a few close calls over the past week.
But storms aren’t just brewing in the Atlantic...
It’s also beginning to look dicey in the commodities market, with lots of “close calls” these days.
Strong headwinds such as the rising dollar have hit some of the most important procyclical assets this week. Apparently, there’s some geopolitical stuff going on, too. Then again, when isn’t there?
Let’s discuss what we’re seeing and try to determine just how likely these winds could evolve into a major storm for commodities.
Energy, base metals, precious metals, and ags have either pulled back from recent highs or have broken critical levels of support.
Given that many areas have experienced near parabolic advances during the past year, a corrective phase would be a healthy and welcome development. It makes total sense for commodities to digest their monster gains at current levels. And remember, sideways is always an option.
On the heels of last week’s surprising drop in the University of Michigan Consumer Sentiment index, we are now seeing a similar decline in the Future Activity Index from the Philadelphia Fed. Just two months removed from a multi-decade high, this index has undercut its post-Covid lows and is now at its lowest level since late-2019. The 2-month decline is the largest in more than 50 years. Not only is current economic data falling short of expectations, but prospects for future growth are also being revised lower. This comes at a time when earnings expectations are still being pushed higher, valuations have swelled and investors remain all-in on equities.
The mostly sideways slide into autumn is continuing, which has kept me on the hunt for more delta-neutral credit spreads to take advantage of during these slow times.
I generally prefer to do these types of trades on sector or index ETFs. But occasionally, I'll take a flyer on a large cap name which isn't likely to suffer any serious price gaps (especially with no nearby earnings events on the horizon).
In the latest All Star Charts Monthly Conference call, the team mentioned a familiar name that is setting up for some continued sideways action that looks like a really good candidate for an Iron Condor trade.
