Interest Rates in the United States hit new 52-week lows last month. But from the looks of it, the commodities market and stock market are not in agreement with that direction. It's when we see divergences among asset classes that it gets my attention.
Today we're looking at the divergences between stocks, bonds and commodities that I believe are pointing to higher rates this quarter. If we're going to take the weight-of-the-evidence approach, it's 2 to 1 in favor of rising interest rates.
Wednesday's Mystery Chart is one of my favorite charts in the world.
First off, I want to thank everyone for your feedback and participation, as always. I received a lot of answers and most of you were buying the breakout along with me, while a few of you were looking for an "oops" to get short and fade it.
I saw a couple tweets yesterday about FAANG stocks and their "lack of participation" in the market's four month rally and just don't get it.
First it was a problem when the largest stocks in the S&P 500 were leading. Now it's a problem that most aren't hitting all-time highs with the S&P 500.
For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.
The point here is to not guess what it is, but instead to think about what you would do right now.Buy,Sell, or Do Nothing?
April 10th we looked for a bounce in Healthcare Providers and were early, so several of our trades were quickly stopped out and others didn't trigger at all. Medical Devices were the last subsector standing and once they were hit, we thought that Healthcare was likely close to a short-term bottom.
Given the extreme oversold readings we were seeing in our work (like percentage of XLV components hitting oversold conditions last week) and the subsequent bounce to start this week, I want to outline five names showing relative strength in the space that could benefit from continued mean-reversion in the sector.
More importantly, they offer well-defined risk and a reward/risk that's skewed in our favor.
Rotation into Energy stocks continues to pick up. While the reward/risk opportunities at the sector/subsector ETF level aren't great, there are several attractive setups within individual stocks.
In this post I'm going to point out seven names within Energy ETFs XLE, XOP, OIH, AMLP, CRAK, and FCG with extremely well-defined risk and skewed reward/risk at current levels.
Half are buying strength (higher probability, but lower reward/risk) and the others are mean-reversion setups (lower probability, but higher reward/risk). Pick your poison.
I just finished writing a free post for All Star Charts India following up on where we've been over the last two months and what this last week of price action means for Indian stocks in the near-term.
As I was writing up the post I noticed a lot of similarities between US Stocks today and where India was just a few weeks ago.
I'm going to summarize the key points, but I'd encourage you to read that post in full so you can really see what I'm talking about below.
For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.
The point here is to not guess what it is, but instead to think about what you would do right now.Buy,Sell, or Do Nothing?
Most of the Equally-Weighted Sector Indexes we track have been underperforming their Cap-Weighted counterparts for the last 16 months, however, we are starting to see some signs that a counter-trend rally in three sectors may be brewing.
