From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
One of the main themes we discussed in the Q3 Playbook we published last week is the lack of any directional bias for equities on a relative basis.
We’ve been obnoxious about the trendless environment for equities on an absolute basis... and now we’re noticing a lot of the same play out in many of the relative trends we monitor.
When there is no edge on absolute terms, we can at least try and generate alpha by taking advantage of relative trends through pair trades.
But, right now there’s really nothing out there giving us an opportunity to do so. This is about as rough of an environment for money managers as you’ll find.
All we see is sideways, sloppy, range-bound action… Standard year-two stuff!
To illustrate what we mean, let's take a look at each large-cap sector SPDR relative to the S&P.
The good folks at Stockcharts.com put together a fun panel and asked each of us to bring 2 charts: Which one tells the story of the first half the best? And which chart am I watching most as we head into the second half?
I've been friends with Jay Woods for a long time and I'm now getting to know John Kosar's work, and I can tell you these are some smart dudes. You want to listen to what these guys have to say.
In fact, much of the sideways chop in commodities is taking place at logical levels of resistance. And aside from the dramatic sell-off in lumber, we see more upside resolutions than violations of critical support levels.
We recently pointed out that base metals managed to hang tough in the face of a significant correction in copper. And this week, tin is breaking out to new all-time highs.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
It's a tale of two markets.
The weight of the evidence remains mixed across asset classes. We also continue to see more and more risk assets struggle at overhead supply. This is particularly true for equity and commodity markets.
From an intermarket perspective, most risk appetite ratios and risk-on relative trends are either moving lower or are rangebound.
Simply put, there's little in terms of directional edge for investors. The data remains split right down the middle -- and there are sound arguments for both the bull and bear case.
Although the information we're getting from the Bond Market is much more consistent these days. And what we're seeing is suggesting lower yields for longer.
A recurring theme when it has come to market breadth is that while it has not been keeping pace with the indexes, it has not been breaking down. That is starting to change. Net new highs have turned negative on a 21-day and 63-day basis as divergences are starting to look more like meaningful deterioration. If they turn negative on a 52-week basis (shown below) it would suggest a more significant breakdown in breadth and a building of downside risks in the indexes.
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 July 19th 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.
We've had a couple picks from our recent Young Aristocrats report that I've liked for options plays. But I waited on this one until today because we needed to get earnings out of the way.
The good news is, the post-earnings report reaction was muted and the setup remains intact, so we're ready to take action.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
Several weeks back, we discussed the fact that new lows were non-existent across just about all of the major averages in the US.
It’s pretty hard for a market of stocks to decline in any meaningful way without an expansion in downside participation. And we just aren't seeing any signs of this when looking through our breadth chartbooks and new low indicators - not even on shorter timeframes. This remains the case today.
So you would think this would be an excellent opportunity for the bears to take control… But, they just can't seem to get it done! Let's dive into some of our breadth and sentiment indicators and see what they're currently saying about this.
