Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Many of the relative trends in stocks that have been in place for a long time have come into question recently as they're showing signs of maturing due in part to the change in leadership we wrote about this week.
In this post, we'll highlight two structural intermarket themes that have remained robust throughout this tumultuous time for equity markets.
The first relative trend that hasn't slowed down at all is the relentless outperformance of the US over the rest of the world. Our first table shows the Wilshire 5000 (DWC) dominating every Global Index over just about every timeframe, from this week to the trailing year.
If you know me by now, you know how much I enjoy all things Japanese. For me, it's the best cuisine on earth. The architecture in Japan is spectacular. I can't take the smile off my face whenever I'm there. If you can believe this, I even passed the Japanese Sake Advisor Exam earlier this year.
There's a blog post I've been working on for a while I titled, "Investing Like a Sumo Wrestler". But that's a conversation for another day.
This week I was watching the new documentary, "The Delicacy", about sea urchins and the divers who harvest them. Uni, which is what the Japanese call the edible part inside the sea urchins, is one of my favorite snacks in the world. You can get good ones from Hokkaido, Santa Barbara and off the coast of South America.
The documentary was awesome, even if you don't like to eat Uni, like my wife. She also loves visiting Japan, but she'll tell you she prefers Italy or Greece. I'm torn.
The headline you'll hear is that unemployment rates are soaring to unprecedented levels. What I always like to point out is that stocks crashed months ago, collectively factoring in just that. Stocks are a discounting mechanism. It's more obvious today than ever, and I think this is a nice reminder.
For the past week or so, it's been a feeling to me that markets are setting up for some sideways chop with any directional bias being to the downside from here.
Meanwhile, options volatilities still remain elevated across the board (though well off the March highs) reflecting a lingering fear among market participants of another shoe to drop as the Coronavirus scare continues to effect human health and the global economy.
Against this backdrop, I'm looking for some delta-neutral credit spread strategies to employ. When doing so, I like to scan the most liquid ETFs and look for the ones exhibiting the highest premiums.
With Chart Summit India now almost a month in the rearview, I finally found some time to go back and rewatch some of the presentations.
Together with our partners, we hosted 20 amazing speakers and thousands of attendees and raised a remarkable amount of money to fight the COVID-19 pandemic. It was a really great event and an honor to be a part of.
With over 10 hours of content from some of the market's top technicians, I won't be able to do them all justice in just a short blog post so I highly encourage you to go watch all the full presentations for yourself. They can be accessed for free here.
With that said I'll try and do my best. Bruni recently wrote a post about some of his main takeaways from the conference which you can read here. I'm going to build on that today and share some of the things I found valuable from the handful of presentations I recently went back and watched.
When the picture isn't clear on the timeframe you're trading, it generally helps to zoom out one, or even two timeframes above it to gain some clarity around the primary trend.
Today we're going to compare and contrast the action in Gold/Silver and Natural Gas/Crude Oil to highlight this exact concept.
There aren't too many charts in the Equity Markets breaking out of decade-long bases on an absolute basis right now...
This week's Mystery Chart was though, and the vast majority of you were buying it against former resistance turned support. We agree with that approach and would be doing the same here.
Thanks as always to all those who participated, but there's just one catch...
The chart was inverted! This means most of you were actually selling the breakdown in the Latin America 40 ETF (ILF).
When we talk about "Precious Metals", it can mean a lot of things. You've got the metals like Gold and Silver, which are behave very differently at times, and you have the stocks with all sorts of market capitalizations. There are a lot of ways to describe the precious metals space, so let's get into a little bit of that today.
Here is a chart of what this group looks like this year. Notice the outperformance from the Gold Miners Index Fund, almost twice the performance of the metal itself. The little guys and silver in general didn't perform nearly as well:
There has been a lot of talk about the potential implications on the broader market if Mega-Cap Growth and Technology stocks were to lose their leadership. Since they have been responsible for driving much of the gains in the major averages for years now... we can only ask ourselves, who might pick up the slack if and when this happens?
In this post, we're going to analyze the top-performing areas today and compare them to their strength before the market crashed in February and March.
We'll also look at the leaders from back then and see how they're holding up today.
This will give us an idea of whether we really are undergoing a change in leadership or not, and if so, where the new areas of strength are.
The broader markets are starting to show signs that we may be setting up for some sideways-to-down chop.
And one sector that is likely giving investors fits is the financials. During this recent "recovery," $XLF has continually been underperforming relative to the S&P. JC shared this chart today highlighting this observation:
With Financials, arguably America's most important sector, making lower lows relative to the rest of the market, it's hard to see them emerge as new leaders. New decade+ relative lows in $XLF is not what you want to see if you think the stock market is going a lot higher. It's actually the opposite.
I look at Regional Banks and wonder, Is this a major bottom? Or is this just a normal consolidation within an ongoing trend? So then I look at momentum in a bearish regime, and its parent sector, Financials, breaking down to the lowest levels relative to the S&P500 since March of 2009:
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
