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.
And at present, markets are a total mess and full of mixed messages as most major stock market indexes continue to churn sideways in consolidation patterns, while many risk-on commodities are in corrective phases.
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. 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.
Check out some of our recent shorts on our trade ideas page.
Last week, we discussed how a lot of the most recent evidence has tilted back in favor of the bulls with a number of upside resolutions, particularly in international equity indexes.
Well, what a difference a week can make. This past week, we saw the opposite as some major risk assets are now failing at key levels.
Again, this speaks to the mixed messages the market is sending now that these holding patterns are beginning to resolve. They’re resolving in both bullish and bearish directions… at least for now.
In today’s post, we’ll offer the opposing view from last week. We will also highlight some key charts that are experiencing bearish resolutions.