In the latest RPP Report put out by All Star Charts, the team remains bullish on the continued sector rotation into energy and oil sector names.
While some of these moves are somewhat extended, there is still a lot of ground to reclaim to get back to former highs. Our bet is the big move is still coming...
From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley
In this week’s Commodity Report, we saw a continuance of many of the same themes that we've been pounding the table on for months now.
Mainly, strength in the procyclical areas of the market like Energy and Base Metals. This fits with what we’re seeing in Equity Markets as the rotation out of Mega-cap growth and into more cyclical sectors takes hold.
However, Crude Oil and Copper aren’t the only Commodities catching a bid right now. We’re also seeing strength in the grain markets.
One of the charts that caught our attention this week was Palm Oil Futures.
Palm Oil is one of the most important Commodities in Asia and combined with Soybean Oil it accounts for roughly 63% of the global production of vegetable oils. Its uses vary from cooking and producing processed foods to personal care products like soaps and fragrances. It also plays a key role as feedstock for biofuel production.
The universe comprises several solar systems- big and small. Similarly, the market comprises several conglomerates- big and small. We're back with another such conglomerate that we'd like to look at today- Bajaj Group.
One of the oldest and most reputable conglomerates of India, the Bajaj Group has been instrumental in generating great returns for investors across the board over the years.
Let's take a look at what the charts have to say.
We created an equally weighted custom index of the Bajaj Group constituents. A big base breakout can be seen here as is the case with several charts in the market. The Bajaj Group seems to have moved out of a four-year base and looks good for another leg of the rally.
Click on chart to enlarge view.
Now let’s take a look at individual stocks and where they stand at present.
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.
1. Dow Averages Take The Driver Seat
At the index level, the Large-Cap Growth-heavy Nasdaq has felt the burden of the last month’s selling pressure. In fact, all other major indices in the US have generated positive returns over the last month. The Nasdaq is the one negative standout. It’s not that we’re seeing money flow out of stocks. Instead, we’re seeing money rotate between stocks.
Bond Yields and US Dollar have been in the spotlight over the last few days. But in the meantime, let's not forget to check on our shiny friends, that are not in their most shiny phases.
What are the levels to watch out for on Silver and Gold? Let's have a look.
Silver has been the stronger one out of the two names and we've seen more resilience from Silver over the past few months. While both the metals haven't been at their shiny best off late, an outperformance in Silver bodes well for precious metals in the weeks and months ahead. It is this outperformance that prevents us from shorting Gold and being selective about the levels we observe.
Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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.
Coming out of recession, economy typically roars beyond expectations
Economic confidence is heating up but needs to expand
Rise in yields & inflation reflect economic strength and are opportunities for investors
It’s been over two decades, but policy makers may finally be getting it right. This is not a blanket endorsement of the stimulus bill that is inching its way through Congress and toward the President’s desk. But it is a recognition that after bearing the cost of stimulus, the economy may be poised to reap the benefits of it as well. Wall Street has certainly celebrated excessive liquidity from the Fed. Fiscal stimulus at this juncture may help the Main Street recovery gain momentum and actually exceed expectations. That used to be the norm, though in recent decades recoveries have stalled out before gaining much traction. This has produced a bifurcated economy where those with Wall Street exposure have greatly benefitted and those with Main Street exposure have struggled to keep up.
The Biotech space has seen a lot of price action in both directions over the past several months. As such, there is no surprise that options premiums in that corner of the market have become a bit elevated.
There's a setup I've spotted that offers us a good opportunity to fade these premiums as the sector pauses to digest recent activity.
Last week's mystery chart was a popular one, so we inverted it to make things a bit more challenging. Someone still guessed it... Nice work.
It was the iShares 7-10 Year Treasury Bond ETF $IEF. The issue with inverting Bond charts is that when you do they look identical to yields. In the case of IEF, we're basically dealing with the US 10-Year Yield $TNX.
Rising rates has been one of the main themes early this year as developed market yields have accelerated higher and hit the pockets of bond investors all over the world.
In this post, we'll check in on some of the most important and most telling credit instruments on both absolute and relative terms in order to piece together the message the bond market is sending investors.
These are the registration details for our live monthly conference call for Premium Members of All Star Charts.
This month’s Conference Call will be held on Monday March 15th at 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
