Key Takeaway: Positive earnings surprises and upward revisions have been setting records. Expectations are now elevated, and economic data is falling short. Macro disappointments, lack of rally participation and widespread optimism could make for a bumpy ride for stocks into year-end.
With a handful of mega-caps driving index-level returns, we want to see sector-level leadership confirmed by similar sector strength on an equal-weight basis, as well as further down the capitalization scale.
Financials are the top-ranked sector in our rankings on both a cap-weight and equal-weight basis. Strength fades among mid-cap and small-cap Financials. Real Estate remains a leader across the board from a weighting and size perspective, though it has slipped on a short-term basis.
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.
Clues From Kiwis
We often look to the Australian dollar as a barometer for global growth, but we can take that analysis one step further by checking in on the arguably more cyclical currency, the New Zealand dollar. It often gives us a nice leading signal on AUD/USD. With a good portion of the New Zealand economy being driven by agriculture, tourism, and international trade, the NZD acts as a nice microcosm for the global economy.
At notable turning points in these trends, we tend to see the New Zealand dollar provide a heads up before it’s reflected in the Australian dollar. Over the last few weeks, while the AUD has been making fresh lows, the NZD has been remarkably resilient, carving out higher lows.
Will this divergence resolve with AUD soon catching higher? The action from cyclicals would certainly support that outcome.
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.
We've already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottoms-up scan, "Under The Hood."
To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. There are also price and liquidity filters. Then, we simply sort by proximity to new highs in order to focus on the best players.
The goal is to catch the strongest names while they’re small and still have serious upside potential. If any of these stocks ever climbs the ranks to the big leagues, the returns could be huge. We’re looking at 5-10x moves just to break into large-cap land!
Let’s dive into this week’s report and see what’s happening in some of the hottest stocks in the Minor Leagues.
We've already got some exposure on the books in the financials sector, but with participation broadening, there are additional opportunities to participate.
And one opportunity in particular offers an opportunity to really leverage into a big win if we get it right.
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.
These are two terms that are often used interchangeably: Technician and Chartist. But many times it’s wrong to do so. You see, all chartists are technicians by definition, but not all technicians are chartists.
What is a chart?
For me, a chart is just a visual representation of the changes in equilibrium between supply and demand.
That's all it is.
We don't have to pretend it's something that it's not.
How the chartist interprets the data on the charts is where the skill and experience comes in. The chart alone won't do much for you, in the same way that a carpenter is way better at using his tools than I could ever be.
What is Technical Analysis?
To me, Technical Analysis is the study of the behavior of the market, and therefore market participants, as opposed to the goods and the services in which a particular market deals.
We refer to the latter as "Fundamental Analysis", which we don't find helpful at all.
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 August 16th 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.
