From the desk of Willie Delwiche.
Click here to access a replay of our conversation.
Expert technical analysis of financial markets by JC Parets
by Peter
From the desk of Willie Delwiche.
This morning I once again had the opportunity to catch up with my colleague Oliver Renick on the TD Ameritrade Network. I always enjoy our chats and today was no exception as we discussed the ongoing speculative unwind in pockets of the market and how the current liquidity backdrop may not give dip buyers the bounce that they have grown accustomed to.
Click here to access a replay of our conversation.
by Peter
From the desk of Willie Delwiche.
Key Takeaway: Mixed liquidity backdrop makes rebuilding risk appetites more of a challenge. Tailwinds that have fueled cyclical strength are tapering even if the Fed is not yet ready to. Breadth on a slippery slope from digestion to deterioration to downtrend.
While the indexes themselves continue to hold up relatively well, there is evidence of deterioration that cannot be overlooked from a tactical perspective. Whether this builds into a situation that argues for more defensive positioning from a cyclical perspective remains to be seen.
Our relative strength leadership group was unchanged last week. Financials, Materials, and Energy are the leaders at the large-cap level and are also holding up well at the mid-cap and small-cap level. Our industry group heat map reflects these leadership trends. There is little evidence here that cyclical value leadership is waning in favor of resurgent cyclical growth. Defensive sectors have fared better on a short-term basis but that has yet to result in a sustained climb in our relative strength rankings.
From the desk of Steve Strazza @Sstrazza
Welcome to our latest Minor Leaguers report.
We’ve already had some great trades come out of this Small-Cap focused column since we launched it late last year and began rotating it with our flagship bottoms-up scan, “Under The Hood.“
To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. After applying price and liquidity filters, we simply sort by proximity to new highs in order to focus on the best players.
The goal is to catch the strongest names while they’re small and still have serious upside potential. If any of these stocks ever climb the ranks to the big leagues, the returns could be huge. We’re looking at 5-10x moves just to break into large-cap land!
And what better time than now to launch a small-cap-focused column? We’ve seen robust evidence of structural rotation down the market cap scale, suggesting a new period of outperformance from small-caps in the coming months and quarters… Maybe even years.
Minor Leaguers is a great way to take advantage of that trend.
Let’s dive in and check out this week’s list of the hottest stocks in the Minor Leagues.
From the desk of Steve Strazza @Sstrazza
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. This information then helps us put near-term developments into the context of the big picture and provides insights regarding 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.
by Peter
From the desk of Steve Strazza @Sstrazza
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.
European equities are in the process of staging a reversal relative to global equities after forming a formidable base. If this ratio of the FTSE Europe ETF can decisively move above this downward sloping 7-year trendline, this would confirm the beginning phases of a new structural uptrend for a region that has acted as a perennial laggard in a Growth dominated environment.
Now that we’re finally witnessing rotation into Value areas like Financials and Natural Resources, Europe no longer is being anchored down by its constituents. That exposure is swiftly becoming a powerful tailwind.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Gold has been one of the last places we have wanted to put our money over the past eight months, second only to Bonds.
Other areas of the commodities space, like Base Metals, Energy, and Ags, along with risk assets in general have experienced an explosive rally. While Precious Metals have gone nowhere. But are we starting to see signs that this could be changing?
Last week we pointed out that Lumber had reached our target and could be due for a pullback. And we’re seeing that play out.
The previous week we noted that other procyclical commodities within the Base Metals group were also reaching our targets and testing areas of potential resistance. And like Lumber and so many other risk-assets, they remain trapped below key levels of overhead supply.
So while much of these former leaders appear to be entering corrective periods, or sideways trends, we’re looking to put our money to work in areas that are trending… And one of those places within the commodities complex that has our attention is Gold and its shiny peers.
When we consider the recent outperformance from defensive areas within other asset classes, it would certainly make sense to see precious metals take the driver’s seat here.
In today’s post, we’re going to examine the following question: After a year of consolidation, is it finally time for Gold to shine? [Read more…]
by Peter
From the desk of Willie Delwiche.
Every streak comes to an end. After a record 243 consecutive days of positive readings, the US economic surprise index slipped below the zero line this week. For a mean-reverting index that has historically spent as much time above zero as below zero, this was a remarkable stretch of better than expected data. While the data now is as strong as it has been at any point in the last year (in some cases, decades), expectations have now surpassed reality and so the surprise index is moving lower. This removes what had been a tailwind for equities and allows for a test of the resiliency of the current rally. Coupled with the tightening financial liquidity conditions and changing risk appetites, this could make for a choppy summer in the stock market.
by JC
It’s always nice to sit down and talk about what the future is going to look like.
Currently, the largest hotel chain in the world doesn’t own any hotels (Airbnb). The largest taxi cab company in the world doesn’t own any taxi cabs (Uber).
Will the largest bank in the world not own any banks? Howard Lindzon says yes, “Banks aren’t dead, they’re walking dead”.
This was fun. I learned a lot.
It gives me more reason to keep an eye on opportunities in the Crypto Markets.
I’m a chart guy, as you’re all well aware. Price drives all of my decision making. But if you’re interested in what’s happening behind the scenes (I am), then this one is for you! [Read more…]