From the desk of Willie Delwiche.

Key Takeaway:

• Global bond yields racing higher.
• Median CPI from Cleveland Fed is the key inflation report.
• April not living up to its ‘best month’ billing.

The race is on for global bonds yields. The 10-year yield in the US is heading toward 3% (a level last touched in 2018), in the UK it’s heading toward 2% (a level last seen in 2015) and in Germany it’s heading toward 1% (a level last reached in 2014). While these global benchmarks are each now contending with their own important thresholds, a decade ago, they were all separated by only a few basis points. Prices for bonds move in the opposite direction of yields, and bond traders are learning how dangerous it can be to try to catch a falling knife....

From the desk of Willie Delwiche.

Key Takeaways:

• March rally takes some sting off of a challenging Q1.
• Short-term strength not yet reflected in longer-term trends.
• More new lows than new highs in the US, but Emerging Market new high list expands.

Stocks continued to bounce off of their March lows last week. It’s not quite lipstick on a pig but this move does take some of the sting off of what has been a weak Q1 for equities. All eleven sectors in the S&P 500 are now in positive territory for March, but only three (Energy, Utilities and Financials) have YTD gains and two of those, just barely so. Four sectors, accounting for more than 50% of the market cap of the S&P 500, are still down 8% or more heading into the final week of the quarter.

From the desk of Willie Delwiche.

It has an ominous name, but not much of a signal. The so-called “Death Cross” occurs when the 50-day average closes below the 200-day average. Today, for the 25th time since 1970, that will happen for the S&P 500. This table shows both where the S&P 500 tends to be in relation to its peak when these Death Crosses have occurred in the past and the experience of the index in the wake of past crosses.

In aggregate, forward returns following Death Crosses are not meaningfully different from any random day in the market over the past 50 years. This is more noise than news and these crosses mostly reflect an index that has pulled back from its peak. The S&P 500 is currently 13% below its January peak, which puts the current Death Cross in line with the historical pattern. The relationship between the 50-day average and the 200-day average describes an environment but is not likely to shape the path going forward.

From the desk of Willie Delwiche.

Key Takeaways:

• News headlines exacerbating underlying trends.
• Leadership rotation has accelerated in 2022.
• Time in the market is a waste of time if you are in the wrong market.

While the leaders of the last decade are weakening, the laggards of the last decade are gaining strength. Commodities are making new highs and Energy, which is the worst performing sector over the past 10 years, is the only sector in the S&P 500 in positive territory on a YTD basis. Globally, we are seeing strength and leadership from the rest of the world versus the US. Trends in Emerging Markets versus Developed Markets are as strong as they have been in over a decade. As we see these shifts, staying in harmony with the trend is critical. “Time in the...

From the desk of Willie Delwiche.

Key Takeaways:

• US equities churn as new lows out pace new highs.
• Bond market is taking notice that the flat-footed Fed is trying to get ahead of inflation.
• 60/40 portfolio off to its worst start in a generation could have “passive” investors looking for greener pastures.

In the wake of the January sell-off, US stocks have been trying to get back in gear. So far that has been easier said than done. The initial rally attempt on the S&P 500 stopped short of the 50-day average and our sector trend indicator was unable to get back into positive territory. One telling sign that a churning/trading range environment remains intact is the new lows continue to outnumber new highs across the NYSE and NASDAQ. Since 2000 all of the net gains in...

From the desk of Willie Delwiche.

Key Takeaways:

• It takes energy to stay on top of this market.
• Follow the leader goes global.
• Higher bond yields are adding market volatility but not financial stress.

Key to last week’s shift in the weight of the evidence from bullish to neutral was the continued deterioration in breadth trends, especially in the US. On everything except the shortest of time frames we continue to see more new lows than new highs. Over the past two months, there have only been two trading days on which the...

From the desk of Willie Delwiche.

Key Takeaways:

• Trends turning flat as breadth becomes a headwind.
• Investors too scared to buy ETF’s suggests sentiment is a tailwind.
• On yields & rates: US is following, not the leader.

This more challenging trend backdrop comes at a time when bond yields are rising and central banks are tightening. On both of these fronts, the US is following global developments. The Fed continues to chase inflation, but at least at this point it's finally paying attention. Maintaining that focus could be a challenge if economic data continues to come in weaker than expected. Friday’s employment report could be a big test. US bond yields are off their highs, but breaking out around the world. German 10-year yields are trying to get...

From the desk of Willie Delwiche.

Key Takeaway: Large-caps take the 2021 crown as mid-caps & small-caps struggle to get back in gear. US strength not being echoed among global equities. Tactical risk management model gives benefit of the doubt to bulls.

• Entering 2022, Real Estate, Technology, Health Care and Consumer Staples hold down the top spots in our S&P 500 sector relative strength rankings.
• Our industry group-based heat map shows deteriorating conditions across Energy and Financials and improving conditions in Staples and Utilities. Leadership from defensive groups is not usually consistent with risk-on behavior.

From the desk of Willie Delwiche.

Key Takeaway: Indexes stumble as generals see their armies fleeing the field. Bond yields drop below important thresholds. Rising volatility brings focus back to managing risk.

• Energy slipped three spots (from 4th to 7th) in the large-cap rankings last week, and the sector appears even weaker beneath the surface. It's in the ninth spot on an equal-weight basis, and conditions are deteriorating within the mid-cap and small-cap energy space.
• Technology remains atop the overall rankings, but relative strength on a short-term basis is from coming from Utilities, Real Estate and Consumer Staples.

From the desk of Willie Delwiche.

Key Takeaway: Cyclical rally needs to prove its strength. New lows and expanding downside volume suggests more fissures beneath the surface. Focus on Value Line Geometric Index for evidence that downside risks are building.

• Financials sector has continued to slip in our relative strength rankings, falling to its lowest level in over a year and dropping out of the leadership group.
• Consumer Staples remain toward the bottom of the overall rankings, but have been the top-ranked sector on a short-term basis and we are seeing evidence of improving trends at the industry group level across market capitalization levels. 
• Large-cap health care is rising in the rankings, but this strength is not echoed at the mid-cap or small-cap level (or even on an equal-weight basis at the large-cap level)

From the desk of Willie Delwiche.

Key Takeaway: Market breadth souring as new lows spike. Absence of breadth thrusts leaves the market adrift and vulnerable to cross breezes. Healthy appetites for risk likely lead to higher bond yields and commodities prices as well as improving broad market trends.

• With Energy and Financials experiencing short-term weakness, new leaders have emerged. Consumer Discretionary, Technology and Real Estate are in the top three spots in our relative strength rankings, showing leadership on both an equal-weight and cap-weight basis.  
• Our industry group heat map shows Semiconductor strength is fueling the leadership coming from the Tech sector.

From the desk of Willie Delwiche.

Key Takeaway: Inflation remains hot as narratives shift. Yields perk up as the bond market takes notice of price pressure. Gold catches a bid as real rates remain negative. Breadth trends point to US leadership.

• Recent leaders have become near-term laggards, with Energy and Financials dropping to the bottom of the shorter-term relative strength rankings. Energy remains strong overall across the rankings and our industry group heat map. The cooling in Financials could be more significant.
• Materials is gaining strength from a sector ranking perspective and is seeing improving trends in our industry group work. We are also seeing pockets of strength within Industrials (Capital Goods and Transportation) and Tech (Semiconductors).