This is the video recording of the August 5th Town Hall Meeting w/ Willie Delwiche

08/05/21 2PM ET

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge 

Let’s flip the script this week and take a more granular approach to our analysis of market internals.

In recent months, we’ve written at length about deteriorating breath. While it’s been our position that the divergences in these indicators are normal following an onslaught of initiation thrusts like the ones we had last year, the lack of participation beneath the surface was drying up to levels that were simply not sustainable.

This lack of confirmation has caused many to question the new highs from the S&P 500 and other major US averages. But, the major averages have masked the pervasive weakness we’ve already been experiencing beneath the surface this year.

In last week’s post, we discussed this weakness in breadth and posed the following question:

Perhaps we’ve already seen the market correct beneath the surface. Maybe that was it…

The major averages are simply not a good representation of what US stocks have been doing for the past 6 months...

With bulls taking control of crypto in the last few weeks, many of the crypto-related equities are showing early signs of life.

Many of these names simply hold Bitcoin on their balance sheet, while for others, the activity taking place in this asset class directly impacts their bottom line.

So it goes without saying that if Bitcoin can sustain a meaningful breakout, it'd serve as a significant tailwind for these names.

Microstrategy is perhaps one of the more direct examples of this thinking, with the CEO taking out hundreds of millions of dollars of debt to add to their growing arsenal of Bitcoin on the company's balance sheet...

On this week's episode of the podcast, I sit down with David Keller to talk about all things behavioral finance. David is one of my favorite guys to talk to about the subject, so I reached out to him and said, "Dave, come on the pod and let's talk about humans".

He happily agreed and so we hit the ground running talking about Anchoring Bias, Loss Aversion, Risk Management, Supply and Demand Dynamics and Market Sentiment.

This wasn't just an academic endeavor. We also discussed current markets, price trends, momentum, breadth and Dave's favorite trade for the rest of 2021.

I think you're really going to enjoy this one. I certainly did!

My entire career I've been told by the old timers that many of their biggest winners have come from Mid-caps.

That always stuck with me, to the point where when we win in mid-caps, it always hits me, "Those guys were right!"

To be clear, the traditional definition of a Mid-cap stock is between $2-10 Billion in Market Capitalization (Market-cap = shares outstanding x price of the stock). 

I honestly don't know how long that's been the definition, or who's in charge of making that up. But I will tell you that I don't remember a time when that wasn't the definition.

And I've been around a couple of decades already.

So is anyone factoring in Mid-cap inflation these days? 

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 'bottoms-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 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, and Salesforce, to a myriad of others… all would have been on...

From the desk of Willie Delwiche.

Key takeaway: A “no fear” attitude envelopes a market marred by mixed signals and deteriorating breadth. Large-cap indexes push to new highs while small and mid-caps trend lower. We even see an expansion in new lows further down the cap scale. But on the surface, optimism shines. Yet, challenges could lie ahead as a lack of risk-seeking behavior suggests a weariness among investors, and seasonal tendencies lean toward a lackluster performance in the coming months. For now,  equities remain the popular choice among market participants as investor sentiment obscures the fragile reality beneath the surface.

Sentiment Report Chart of the Week: Investors Love Equities

If you want to know what is loved, see where people put their money. Through the first seven months of the year, equity ETFs have seen more than $350 billion of inflows (over the past year, that number swells to half a trillion). Bond ETFs have...

Why didn't I buy this coin when it was $10?

Why did I sell early?

Why didn't I buy the dip?

Why didn't I buy more?

How did I not see the top?

These are questions almost everyone who's been involved in crypto has asked themselves and felt, at one point or another.

Some call it a lack of discipline or FOMO, but it's really all about managing future regret.

This dynamic is undoubtedly present in other asset classes too. Still, it's put on full display in this space, where people are made to believe that regularly achieving 10x baggers is a normal occurrence.

The returns people feel they can obtain by holding coins in this space are largely based on a perfectionist mindset which is both unhealthy and unrealistic.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

We held our August Monthly Strategy Session last night. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month. 

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

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, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.