From the desk of Steve Strazza @sstrazza
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.
We 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 and discuss the most important themes and developments currently playing out in markets all around the world.
While the weight of the evidence still remains in the bullish camp, bears seem to add to their list of talking points with every passing week of late. We believe the highest probability outcome over the coming weeks to months is for risk assets to remain in a mixed and messy environment. Once we begin to see evidence that indicates the current “chop fest” is nearing an end – which could simply come in the form of a reduction in the number of bearish data points, we think this party resumes in the direction of the primary trend… which remains aggressively higher in most risk assets.
But as the evidence becomes increasingly mixed, so does the way we want to approach the market and position ourselves to profit from the present environment. While we’re still buying plenty of stocks exhibiting leadership all around the globe… for the first time in over a year, we’re focused more on shorting the losers.
The latest incoming evidence has been overwhelmingly bearish and has continued to reinforce our cautionary outlook. Although, we have reason to believe this could finally be changing as risk assets made some real progress since our last RPP Report.
We still need to see some follow-through and confirmation of these developments, but over the past two weeks, we’ve seen more bullish data points than we have in months.
The ever-growing list of stocks and other risk assets consolidating at resistance has been a main theme we’ve hit on relentlessly of late. This had caused us to turn more and more cautious in recent months.
Well, much of the bullish information we’re seeing is from many of these holding patterns resolving higher from key levels of interest.