Click here to sign up for our free “Chart of the Week”

All Star Charts

Expert technical analysis of financial markets by JC Parets

Weekly Market Notes: Uptrends In Short Supply

by

From the desk of Willie Delwiche.

The uptrend for bonds peaked in early 2021. The trend for stocks did so a year later. Commodities peaked in June and over the past few months the trend has been slowly (an unevenly rolling over). 

More Context: It could always reverse higher, but the commodity trend has fallen two weeks in a row and is down in 6 of the past 10 weeks. As the summer peak in commodities moves further into the rear-view mirror, it looks increasingly like all three of the major asset classes are now in downtrends. This leaves investors with fewer places of refuge as the most challenging year in a generation grinds to a close. Business cycle history suggests that the next important turn in trend will be bonds turning higher (and bond yields turning lower). It hasn’t happened yet (despite the recent drop in bond yields) but our long-term trend indicators suggest bonds are closer to turning higher than stocks (and bonds are trending higher relative to stocks). While the pattern is not set in stone, equities have not made the case that this time will be different.     

We take a Deeper Look at a week of fumbled opportunities and areas of interest in an environment where equity market uptrends are hard to find.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaway:

  • Volatility is taxing investor portfolios
  • Stocks reckoning with new liquidity regime
  • New lows are expanding as selling pressure crescendos
Stocks remain weak and selling pressure has intensified. Risk On indexes are breaking down and the Risk Off environment remains intact.
Some see volatility as the price of admission that investors need to pay to receive the long-term return potential in stocks. I see it as a portfolio tax that you are better off not paying. It should not be a surprise that in avoiding an equal number of the best and worst days in the market, portfolios experience less volatility and better returns over time.
While we cannot hand select the days we want to avoid, we do know that the biggest up-days and down-days tend to cluster together in periods of market stress. Our risk management approach suggests investors benefit from less exposure to risky assets during those periods.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaway:

  • 2022 gives investors no place to hide.
  • Stocks do well when rates rise slowly – an aggressive Fed is a headwind for investors.
  • Hard to argue that a bear market has run its course when more stocks are making new lows than new highs.
The future’s market now expects 50 basis points of tightening at this week’s FOMC meeting to be followed by another 75 basis points of tightening at the June meeting. On top of the 25 basis point rate hike in March, that would be 150 basis points of tightening in just three meetings. It’s been a long time since the Fed moved at such an accelerated pace. For equities, not all tightening cycles are created equally. Stocks can hold up well when the Fed is pursuing a deliberate pace, but tend to suffer in periods when the pace of rate hikes is rapid.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaway:

  • Global bond yields racing higher.
  • Median CPI from Cleveland Fed is the key inflation report.
  • April not living up to its ‘best month’ billing.
The race is on for global bonds yields. The 10-year yield in the US is heading toward 3% (a level last touched in 2018), in the UK it’s heading toward 2% (a level last seen in 2015) and in Germany it’s heading toward 1% (a level last reached in 2014). While these global benchmarks are each now contending with their own important thresholds, a decade ago, they were all separated by only a few basis points. Prices for bonds move in the opposite direction of yields, and bond traders are learning how dangerous it can be to try to catch a falling knife.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaways:

  • March rally takes some sting off of a challenging Q1.
  • Short-term strength not yet reflected in longer-term trends.
  • More new lows than new highs in the US, but Emerging Market new high list expands.

Stocks continued to bounce off of their March lows last week. It’s not quite lipstick on a pig but this move does take some of the sting off of what has been a weak Q1 for equities. All eleven sectors in the S&P 500 are now in positive territory for March, but only three (Energy, Utilities and Financials) have YTD gains and two of those, just barely so. Four sectors, accounting for more than 50% of the market cap of the S&P 500, are still down 8% or more heading into the final week of the quarter.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

It has an ominous name, but not much of a signal. The so-called “Death Cross” occurs when the 50-day average closes below the 200-day average. Today, for the 25th time since 1970, that will happen for the S&P 500. This table shows both where the S&P 500 tends to be in relation to its peak when these Death Crosses have occurred in the past and the experience of the index in the wake of past crosses.

In aggregate, forward returns following Death Crosses are not meaningfully different from any random day in the market over the past 50 years. This is more noise than news and these crosses mostly reflect an index that has pulled back from its peak. The S&P 500 is currently 13% below its January peak, which puts the current Death Cross in line with the historical pattern. The relationship between the 50-day average and the 200-day average describes an environment but is not likely to shape the path going forward.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaways:

  • News headlines exacerbating underlying trends.
  • Leadership rotation has accelerated in 2022.
  • Time in the market is a waste of time if you are in the wrong market.

While the leaders of the last decade are weakening, the laggards of the last decade are gaining strength. Commodities are making new highs and Energy, which is the worst performing sector over the past 10 years, is the only sector in the S&P 500 in positive territory on a YTD basis. Globally, we are seeing strength and leadership from the rest of the world versus the US. Trends in Emerging Markets versus Developed Markets are as strong as they have been in over a decade. As we see these shifts, staying in harmony with the trend is critical. “Time in the market” can be a waste of time if you are in the wrong market.

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

by

From the desk of Willie Delwiche.

Key Takeaways:

  • US equities churn as new lows out pace new highs.
  • Bond market is taking notice that the flat-footed Fed is trying to get ahead of inflation.
  • 60/40 portfolio off to its worst start in a generation could have “passive” investors looking for greener pastures.

In the wake of the January sell-off, US stocks have been trying to get back in gear. So far that has been easier said than done. The initial rally attempt on the S&P 500 stopped short of the 50-day average and our sector trend indicator was unable to get back into positive territory. One telling sign that a churning/trading range environment remains intact is the new lows continue to outnumber new highs across the NYSE and NASDAQ. Since 2000 all of the net gains in the major US indexes have come in the 70% of the time that the net new high advance/decline line has been trending higher. Right now it’s been moving lower since mid-November – with less intensity than a few weeks ago, but lower nonetheless. It is exceedingly difficult for the indexes to make sustained upside progress when more stocks are making new lows than new highs.

[Read more…]

Recent Posts

Tag Cloud

$AAPL $CL_F $DIA $DX_F $EEM $FXE $GC_F $GLD $IWM $ng_f $QQQ $si_F $SLV $SPX $SPY $TLT $tran $UUP $XLB $XLE $XLF $XLI $XLP $XLU $XLV $XLY djia es_f eurusd ewz fxi fxy gdx HG_f iyt kre mdy rut tnx ung usdjpy uso xlk zb_f zn_f
Real Time Analytics