This month marks the one year anniversary of the top in stocks.
And more specifically, I mean the top in the internals of the U.S. Stock Market. Remember, that's the best things were, and it's been a painful deterioration ever since, particularly for most U.S. Index Fund investors, growth investors and most individual U.S. stock pickers.
The new highs list these days is loaded up with ADRs, Metals stocks, Staples and Energy. Most of the other stocks have been struggling. Not all of them are down, but many are sideways at best.
This chart really tells the story of what's been going on. We discussed it on Tuesday night's call:
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
There’s been very little happening on our risk checklist, as evidence for risk appetite remains split between bulls and bears.
The last time we discussed it was in our Q1 Playbook. While the list hasn’t picked a decisive direction yet, the fact that it's such a mixed bag is information in and of itself.
It's been an excellent roadmap for us in recent months, because just like the market -- our risk checklist has also been a mess.
Let's take a look at where we stand and discuss some of the more recent developments.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
In April 2020, crude oil traded below zero and marked the perfect capitulation event for a number of trends.
Around the very same time, both commodities and stocks bottomed and kicked off major rallies.
Until recently, commodities had underperformed stocks for about a decade. To make matters worse, they were moving lower on an absolute basis for most of that time as well.
Not only have commodities started to trend higher on an absolute basis again. They're also undergoing a reversal in their relative trend with stocks and other alternatives.
We’ve been clear about our bullish position as we’ve discussed the potential for a new commodity supercycle for over a year.
Now, we want to take that thesis one step further as the evidence is building in favor of commodities experiencing a sustained period of outperformance relative to stocks.
To best take advantage of this trend, we want to be overweight commodities and commodity-related stocks.
To some investors, they might look at the market and say, "Hey on Monday the market was up a little, and today is was down a little. NBD".
And they won't be wrong.
In fact, Charlie Dow always preached that closing prices were the most important prices. And that was 130+ years ago.
But for those of us who understand the current circumstances. For those of us who do watch the market internals and intraday action, we wouldn't come to that sort of simple conclusion that easily.
In fact, we'd probably disagree with the, Up a little Monday and Down a little Tuesday idea.
