From the desk of Steve Strazza @Sstrazza and Grant Hawkridge @GrantHawkridge

In recent months, we've seen a rare bid in defensive assets as investors position for more mixed markets and messy action in the weeks and months ahead.

These defensive areas of the market have stopped trending lower on relative terms and many are rebounding off of very logical support levels... Gold Miners and Bonds are two examples of safe-haven assets that we recently got involved with on the long side in order to express this view.

Now add the following developments to the mix:

This is the video recording of the May 20th Town Hall Meeting w/ Willie Delwiche

05/20/21 2PM ET

From the desk of Steve Strazza @sstrazza

As the market has become increasingly mixed, it's time to switch up our strategy a bit.

As we outlined in our post yesterday, for the first time in about a year, we are shorting stocks.

But this statement requires an asterisk...

We are shorting some stocks. And at the same time, we're still buying the leaders as plenty of stocks continue to show impressive strength -- particularly those with cyclical or value characteristics. That's where we're focusing for long ideas.

As for shorts, it's all growth. That is where the weakness is. We're not only seeing deterioration and relative weakness at the index level for growth stocks -- the internals are also deteriorating beneath the surface.

This is simply a tale of two markets. As growth-heavy averages like the Nasdaq roll over, the leadership areas are registering bullish breadth thrusts and carrying on higher like business as usual.

From the desk of Willie Delwiche.

A box of family photos showed up at my house this weekend. 

Some are relatively recent, others stretch back nearly a century. Together, they tell a story of generation after generation experiencing life in its many stages. Each one captures a moment

One that really stuck out to me was an image of a camping trip from more than 90 years ago. You can see an old car with a canvas tent pitched against it. At a picnic table, we see a lady and two young boys. The younger of these two is my grandfather. Next to him is his brother. Behind him is their mother (my great-grandmother).

“Now that's camping done right,” I thought as I inspected the picture.

From the desk of Steve Strazza @sstrazza

First of all, thanks to everyone as always for participating in this week's Mystery Chart.

As noted in the Mystery post last week, the rounding bottom in question is a pattern we've become all too familiar with since last year.

The reason for this is simple: The chart was merely a derivative - or just another way to illustrate and visualize the overarching theme that's driving so many of our cross-asset relationships these days... The sustained rotation out of Growth  and into Value.

We've written a lot about this theme since last year, and more recently have been pounding the table on a new theme that's taken the forefront for markets across the globe... We believe we're in for a trendless or rangebound period for risk assets as well as an increasingly bifurcated or mixed market. 

Much of this divergence in performance among various groups can be directly attributed to this trend toward value and away from growth.

From the desk of Willie Delwiche.

Key Takeaways:

• Speculative excesses are being unwound as risk appetites reverse
• Upward pressure on bond yields a headwind for equities
• Liquidity is the lifeblood of the market and right now it is evaporating

While the Fed is musing about tapering, the market, as usual, is already in action. Upward momentum in bond yields and an economy that has soaked up liquidity have become headwinds for equities at a time when investors are already re-thinking risk appetites.

We recently had on a counter-trend trade in gold that worked out (we took off the trade at our profit target this week), and we're starting to see a similar rationale and setup in bonds.

I'm going to let Steve Strazza do most of the talking here because he had an excellent riff on this in the latest R.P.P. Report:

We debuted a new scan recently which goes by the name- All Star Momentum.

All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.

While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.

Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.

From the desk of Willie Delwiche.

You know by the time the journalists get wind that things are good, it's probably almost time for it not to be anymore.

We just saw the best 52-week period for stocks in over 75 years. You know what they were telling you the week that rally started?

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

One of the most frustrating questions plaguing investors at the moment is... "How long will this choppy environment last?"

And one question we’re asking internally is… “What is with all these mixed signals!?”

Once the latter clears itself up, we'll have our answer to the former... But not until then.

When the outlook becomes increasingly murky, the best action is to take a step back, let the smoke clear, and weigh each new piece of evidence as it becomes available.

For now, the most important evidence we have is our list of risk-on commodities and equity indexes testing critical levels of interest grows larger by the day.

There seems to be no end in sight. Complicating matters further, we’re actually seeing this kind of price action throughout the risk asset landscape. It's not isolated to a single asset class or region. We're seeing it in Stocks, Bonds, Commodities, and even Currency Markets... and not just in the US, but also abroad.