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.
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.
Europe Stands Strong On The Global Stage
European equities are in the process of staging a reversal relative to global equities after forming a formidable base. If this ratio of the FTSE Europe ETF can decisively move above this downward sloping 7-year trendline, this would confirm the beginning phases of a new structural uptrend for a region that has acted as a perennial laggard in a Growth dominated environment.
Now that we’re finally witnessing rotation into Value areas like Financials and Natural Resources, Europe no longer is being anchored down by its constituents. That exposure is swiftly becoming a powerful tailwind.
The process of our analysis is such that we look at a variety of charts in order to arrive at a view at any given point in time. To make sure we're identifying new trends that are developing in the market, we have several breadth indicators that we track.
As we already know, the market has been in a bit of a mess off-late. Within this market move, different sectors have taken leadership- almost as if playing a game of musical chairs.
Over the weekend when I was going through the usual suspects (charts) I noticed a slight change in market activity. So here I am talking about it!
This week we're looking at two long setups this week. One in the Chemicals space and the second one in the Auto sector. While Chemicals have been among the gainers over the past few weeks, the Auto seems to be catching a bid off late.
We retired our "Five Bull Market Barometers" in mid-July 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.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Gold has been one of the last places we have wanted to put our money over the past eight months, second only to Bonds.
Other areas of the commodities space, like Base Metals, Energy, and Ags, along with risk assets in general have experienced an explosive rally. While Precious Metals have gone nowhere. But are we starting to see signs that this could be changing?
Last week we pointed out that Lumber had reached our target and could be due for a pullback. And we’re seeing that play out.
Every streak comes to an end. After a record 243 consecutive days of positive readings, the US economic surprise index slipped below the zero line this week. For a mean-reverting index that has historically spent as much time above zero as below zero, this was a remarkable stretch of better than expected data. While the data now is as strong as it has been at any point in the last year (in some cases, decades), expectations have now surpassed reality and so the surprise index is moving lower. This removes what had been a tailwind for equities and allows for a test of the resiliency of the current rally. Coupled with the tightening financial liquidity conditions and changing risk appetites, this could make for a choppy summer in the stock market.
I'll be honest with you. I've been on cruises before. I don't think I have a need to ever do them again. I mean, the time spent "in port" was where the real fun for me was. Time trapped on the boat? Meh.
But, I know many people disagree with me and LOVE going on cruises.
I'm fine with that. Especially if it gives me an opportunity to make some money. And we've got one such opportunity on board!
It's always nice to sit down and talk about what the future is going to look like.
Currently, the largest hotel chain in the world doesn't own any hotels (Airbnb). The largest taxi cab company in the world doesn't own any taxi cabs (Uber).
Will the largest bank in the world not own any banks? Howard Lindzon says yes, "Banks aren't dead, they're walking dead".
This was fun. I learned a lot.
It gives me more reason to keep an eye on opportunities in the Crypto Markets.
I'm a chart guy, as you're all well aware. Price drives all of my decision making. But if you're interested in what's happening behind the scenes (I am), then this one is for you!
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Check out our latest Mystery Chart!
What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So let us know what it is… Buy, Sell, or Do Nothing?
The market has been messy for a while and we've been reiterating that point for some time now. There are no new signals in terms of a direction, but we thought this is a good time to look at our risk metrics.
When we go through the metrics, we are essentially trying to put them in three buckets. Positive, Negative, and Neutral. Going by the weight of the evidence, we decide which way to go. Leave it all to the charts, they're your map for this treasure hunt.
There are several different metrics that we track on a global and a local level. The goal is to identify whether we are risk-on, risk-off, or waiting. This translates to how liquid one's portfolio could be at a given point.
Index view:
First up, let's take a look at what Nifty 50 is up to. We can see that since February this year, the market has been consolidating. This move has been limited between 15,470 and 14,250. What we also noticed early on was the divergence in the indicator. Momentum was losing steam despite price making new highs. That acts as an early signal of a possible change in momentum. Keep in mind, it is not the sole signal to track.
From the desk of Louis Sykes @haumicharts and Steve Strazza @sstrazza
The Crypto space just experienced its worst day since the height of the Covid crash.
Bitcoin was down over 30% on an intraday basis, while Ethereum was almost cut in half.
We see this recent action aligning Crypto with what's taking place throughout the market. Bulls have had a more challenging time in recent months, and risk assets are coming under increasing pressure.
