Key Takeaway: Investors finding themselves with too much Technology exposure. Speculative unwind occurring as neglected areas of the market make new highs. Inflation concerns are overdone in the near term but represent a new reality for the coming decade.
A few of my readers have pinged me privately drawing my attention to an Oil & Gas sector name that could possible make for a good "catch up" trade in the space. I generally would rather play in the leaders, rather than hope for the laggards to catch up, but I've been observing the price action from a safe distance after the ASC team put out a bullish idea in this name during their Monthly Charts Strategy Session a couple weeks back.
I like the way it put in a hard reversal last week and it's giving me some comfort to get in now with calls options priced pretty affordably.
Welcomeback to our latest "Under The Hood” column for the week ended May 14, 2021. This column is published bi-weekly and rotated on-and-off with our Minor Leaguers column.
In this column, we analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
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.
Will Bonds Follow The Path Of Bullion
A few weeks ago, we put out what you could call a “lower conviction” trade idea in Gold Miners. The reason we did this was simple and boiled down to two things: 1. The risk/reward profile; and 2. The primary trend. The prior was simply too good to ignore as price tested a formidable level of former resistance turned support. And this was taking place within the context of an underlying uptrend. Fast forward to today, and that trade has worked out beautifully (see lower pane).
Welcome to our latest RPP Report, where we publish return tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
You can consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes as well as discuss the most important themes and developments taking place in markets all around the world.
While the weight of the evidence remains in the bull's favor, we continue to see more data arrive that suggests the environment could be shifting toward one that is less conducive to risk assets, at least over shorter timeframes.
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. We can then put these near-term developments into the context of the big picture and glean insights into 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 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.
Over the past few days as the market continued to churn sideways, we witnessed a set of stocks doing well as a group. As sector rotation continues to play out, we see different groups play the game of musical chairs as they move in and out of strong and weak zones.
Fertilizer stocks seemed to have gotten activated recently and there a few names here that we've been tracking for some time.
Let's take a look at the individual names:
The first one here is GSFC. Gujarat State Fertilizers & Chemicals. What we see here is a three-year base breakout with the price moving past its long-term resistance of 114. As the overhead supply has been absorbed at these levels, the price is now ready to move higher in the next leg of the rally.
The indicator has been in the bullish momentum territory, staying rather close to this zone during interim corrections as well.
We are bullish above the level of 114 with a target near 167.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Lumber futures have been on an absolute tear since last spring. The vertical but volatile price action off last year's lows is something for the history books.
After trading down to 250 in late March of 2020, Lumber has since shot back above 1,600, where it trades today. It’s no wonder social media is full of people flaunting their wealth with stacks of timber.
But we have to ask... is it time for a pullback? Is this rally overdone here?
Let’s take a deeper look and discuss why we believe the logical move for Lumber over the short term is sideways... or even lower.
Here’s the chart. Look at that face ripper - up nearly 7x in just over a year!
The one chart is actually two charts this week. On the left is the S&P 500 and the percentage of stocks in that index that are above their 200-day average (90%). On the right is the NASDAQ Composite and the percentage of stocks in that index that are above their 200-day average (50%). The contrast could hardly be more stark. Even as weakness has been seen in some of the largest sectors (like Technology), the S&P 500 is being supported by ongoing strength in cyclical values areas. The NASDAQ has little to no exposure to those sectors that are doing the best right now and is bearing the brunt of speculative excesses being unwound (the collapse in equity call options is evidence of this shift).