From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
We’re beginning to see signs that risk-on behavior is re-entering the market.
Commodities are ripping in the face of a rising dollar.
Cyclical stocks are back in gear as the S&P 500 High Beta ETF $SPHB posts higher highs and higher lows relative to its low-volatility alternative $SPLV.
Meanwhile, classic risk-appetite barometer AUD/JPY sliced through a critical level of former support-turned-resistance earlier this week.
All of these point to an increasing risk-on environment.
But what does the bond market have to say about investor positioning toward risk?
Let’s look at a couple credit spreads that speak to investors’ willingness to incur risk.
One thing unique about the market is that the game is never over. There aren't four 15-min quarters or two 20-min halves like in sports.
In those endeavors there is a beginning and an end.
You know who won (or who tied in some cases). But the match is over, and there will be another one in a few days or a few months, depending on the sport.
In the market, it never ends. This can cause issues psychologically, so it's something we should all be aware of and keep in mind.
But if you ask me, currently the bulls are scoring a lot more points. This is the first time we've seen that since Q1 this year, when the bears started running up the score.
Look at the S&P500 break out to new all-time highs relative to US Treasury Bonds.
My favorite Head & Shoulders Patterns are the ones that aren't that at all.
Markets trend. We know that for a fact. That's why Technical Analysis works. Because as Technicians, we're identifying primary trends.
And since we know that market returns do not fall under a normal distribution, and in fact, prices actually trend, it gives us a huge advantage over those who purposely choose to ignore price.
Funny how people like to ignore the only thing that actually pays anybody.
I always thought that was so strange.
Anyway, in today's example of "Not a Head & Shoulders Top", we take a look at Copper Prices. If you have any exposure whatsoever in the market, stocks, bonds or otherwise, then this is a resolution that will interest you and most certainly impact the value of your portfolio.
So is this a massive top in Dr. Copper? Or just a continuation pattern that will resolve higher, in the direction of the underlying trend?
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
We’re finally starting to see resolutions in the bond market.
The 30-year yield is back above 2.00%, the 10-year has reclaimed 1.40%, and the 5-year yield has cleared 1.00% for the first time since February 2020.
Now that it appears rates have picked a direction, what are the implications for the other two major asset classes, stocks and commodities?
As we highlighted last week, we want to look at cyclical and value stocks along with economically sensitive commodities, specifically energy and base metals.
And, in case you haven’t heard, higher yields should also put a bid in financials.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
I was talking to the team earlier this week and mentioned that I was having a hard time writing. Grant and Ian were quick to remind me that it's probably because "nothing new is happening!"
They were right. Until now...
We finally got a major resolution in what we consider one of the most important charts in the world these days.
I'm talking about the US 10-year yield reclaiming that critical 1.40% level this week. And this begs the question as to what a rising rate environment might mean for investor portfolios.
Well, one thing we know for sure is we want to stay away from bonds... unless we're shorting them.
But how do we want to position ourselves in the stock market if yields are breaking out?
It's simple really. Some stocks do better with rising/higher rates, while others thrive in markets characterized by low growth and low yields. If this is the beginning of a fresh move higher for yields, then we want to be focused on buying the stocks that are likely to benefit the most.
Welcome to our latest RPP Report, where we publish return tables for various 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.
As the third quarter winds to a close, the bulls just took the lead for the first time since early in the 1st half.
Everything is clicking for them and they're in control of the game right now. While it's been a nice comeback, it's still just 52 to 48, so they have plenty of work to do.
I'm not talking about basketball. Not the Chicago bulls. I'm referring to stock market bulls and the current score on our risk checklist.
It's currently at its highest reading since we started publishing it back in June, so we'd be remiss not to write about it.
It's been a great roadmap for us in recent months so let's have a quick look at what it's saying now as well as some of the more recent developments that have taken place.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Mixed signals have been the rule rather than the exception since the market peaked in early February.
The major stock indexes have continued to print record highs while breadth has deteriorated beneath the surface, creating several bearish divergences.
Some stocks have gone up and some stocks have gone down. But the reality is that most stocks have gone nowhere.
The same is true for commodities.
We’ve noticed pockets of strength in base metals, livestock, and softs. But the majority of commodities have remained range-bound since the beginning of May.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Welcome to our latest RPP Report, where we publish return tables for various 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.
In our last report, we discussed all the whipsaws we had been witnessing in recent weeks and noted that the next major piece of information would be the velocity of the reactions these charts made in the opposite direction.
