We’ve been loud about energy lately. And how can we not be?
Energy stocks were the most resilient during the H1 selloff and are by far the best-performing sector off the 2020 lows. Every afternoon, energy quietly leads the pack into the close, whether the market is green or red on the day.
But the recent rally in stocks has started to fizzle. And even energy is beginning to feel the downside pressure.
While everyone scrambles to label the recent rally, gearing up for the next leg higher, or preparing for the world's end, we want to focus on the leaders – energy!
If this leadership group starts to fall, it could be an early warning sign of broad selling on the horizon.
And, with Labor Day upon us, it just so happens the energy sector ETF $XLE is retesting a critical shelf of former highs.
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.
We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more -- but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
Today, it looked like the market wanted to continue yesterday afternoon's powerful late rally.
Well, it was not to be, as stocks have broadly declined since lunchtime and indices are in the red as I type this.
For me, this offers yet another opportunity to sell some delta-neutral options premium to continue providing some ballast to the directional bets in my portfolio.
The late-July breadth thrust provides a breadth thrust regime that lasts for a year (or more if we get additional breadth thrusts between now and mid-2023). In such an environment, near-term oversold conditions tend not to persist and, in fact, reverse quite quickly. One way of measuring this is to look at the percentage of world markets trading above their 50-day average. Anything above 70% is pretty good participation, whether we are in a bullish breadth thrust regime or not. Below 40% is a different story. Without a breadth thrust as support, the S&P 500 struggles to make headway when the percentage of world markets above their 50-day average collapses. But within breadth thrust regimes, it signals an oversold condition that leads to strength.
The percentage of world markets above their 50-day average was at 90% in mid-August and is now down to just 25%. The recent breadth thrust suggests that rather than a red light arguing for caution, the signal now is a greenlight encouraging exposure.
Bryant R. Riley, chairman and CEO of B. Riley Financial Inc $RILY, and director Randall E. Paulson both filed Form 4s reporting purchases for a combined $3.7 million. Both executives have been frequent buyers all year.
Arthur Laffer, the former Reagan administration economic adviser known for the Laffer Curve, filed a Form 4 revealing a share purchase in NexPoint Residential Trust $NXRT.
Heading into Q3, we wanted to play a mean-reversion bounce in US treasury bonds. A long list of reasons supported this position:
US Treasuries experienced their worst H1 in history (or close to it).
Bonds were finding support at their previous-cycle lows from 2018.
Commodities and inflation expectations peaked earlier in the spring.
Assets that benefit from rising rates (financials) were making fresh lows.
Global yields were pulling back.
And, quite frankly, our risk was well-defined. We can’t ask for much more. For us, the greater risk was not taking a swing at this trade in the event bonds ripped higher…
Two months later, bonds across the curve are taking out their 2018 lows. The market has proven our mean-reversion thesis wrong. But we can live that because we manage risk responsibly.
It’s the most important part of playing this game.
Easily, the second-most important is to remain flexible.
