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[PLUS] Weekly Market Notes

August 22, 2022
JC Parets
From the desk of Willie Delwiche.

Key Takeaway:

  • Rally has not produced risk on leadership.
  • Lack of stress keeps upward pressure on rates.
  • Macro concerns testing resiliency of market bulls.

There has already been a steady increase in expectations of a 75 basis point rate hike when the FOMC meets in September. More importantly, expectations that the Fed will cut rates soon after the tightening cycle is complete have faded. This is leading to renewed upward pressure on bond yields (which have been experiencing their most sustained uptrend in the past 40 years). In periods of elevated inflation, stocks and bonds tend to become positively correlated. That has been on full display this year, as balanced portfolios have been mired in a more persistent downtrend than any other experienced in the past decade.

[PLUS] Weekly Momentum Report & Takeaways

August 22, 2022
Ian Culley

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

Macro Universe:

[PLUS] Weekly Top 10 Report

August 22, 2022
Steve Strazza

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

New Leaders Meet Resistance

Another group that has enjoyed the recent rally has been biotech. Biotechs have been among the strongest groups since stocks rebounded off their summer lows. 

As you can see in the chart, IBB is now running into a significant resistance level as prices pull back at their year-to-date pivot highs. This 133 area also coincides with key prior-cycle highs from 2015. With so much price memory here, this is a logical level for some corrective action, and that’s exactly what’s taken place since last week. We’re seeing similar price behavior in other sectors and indexes. For the most part, it is constructive as stocks have earned a breather following the rally over the past few months.

[PLUS] Weekly Observations & One Chart for the Weekend

August 19, 2022
JC Parets

From the desk of Willie Delwiche.

With the latest surge, the S&P 500 has experienced 17 Momentum Thrusts since 1980. Excluding the signal from earlier this week, eight of these have been accompanied by Breadth Thrusts and eight have not. The difference in the market’s reaction to such moves could hardly be more stark. When accompanied by breadth thrusts, momentum thrusts see strength persist. In these cases, the S&P 500 has never been lower 1, 3, 6 or 12 months later. On average the S&P 500 has been 15% higher 6 months after these momentum thrusts and 25% higher 12 months after the thrust signal. Without a breadth thrust, surging momentum can be climactic and the S&P 500 can struggle to make any headway. The average return 12 months after such signals is less than half the average of all periods since 1980. We don’t hang our hat on any one indicator or single signal. But the combination of breadth and momentum thrusts experienced over the past few weeks suggests investors should be looking for stocks to go higher, not lower, from here.  

Breadth Thrusts & Bread Crusts: Perfect vs Good Enough

August 18, 2022
JC Parets

From the desk of Willie Delwiche.

I’ve got an old pair of Chaco sandals that I’m not ready to part with just yet. But the soles were becoming detached from the footbed, so I had to do a little repair work. 

I glued them up and started thinking about rigging a clamp to provide even pressure to help the glue set. Catching sight of a couple of bricks laying nearby, I realized that these would work just fine for this type of job.

Would a well placed clamp or two have produced a more textbook repair? Perhaps. But the bricks I had at hand worked just fine for this.

[PLUS] Weekly Sentiment Report

August 17, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: Permabulls will almost always complain about rallies being unloved, just as permabears never leave their refrain that downside risks are under appreciated. That is the prism through which they view the world. In the current situation, complacency is rising and optimism is building, both from low levels. After the buying panic seen in the NAAIM data in July, we saw something similar in this week’s data from Consensus Inc (the largest one-week increase in optimism in over a decade). Even though bears still outnumber bulls on the AAII survey, equity ETF inflows are heating up. The shift from excessive pessimism to increased optimism is the most bullish part of the sentiment curve and that is where we find ourselves. Breadth thrusts and surging momentum are cherries on the top.

Sentiment Report Chart of the Week: Strong Momentum Doesn’t Usually Just Evaporate

[PLUS] Dynamic Portfolio Management

August 16, 2022
JC Parets

From the desk of Willie Delwiche.

Breadth is improving and our bull market re-born checklist has satisfied two more of its criteria. We are moving off the sidelines and getting more involved, increasing equity exposure in both the Cyclical and Tactical Portfolios and staying in harmony with current leadership trends.

[PLUS] Weekly Market Perspectives - Breadth Thrust! Now What?

August 16, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaways:

  • Breadth thrusts and global strength have fueled the market in the past
  • Price patterns are consistent but participation is stronger now than in 2008
  • If June low was important, remainder of 2022 could see less volatility and more strength

The first half of 2022 was a great time to be on the sidelines, letting the bulls and bears bloody themselves in the market. Last year saw the previous breadth thrust regime expire in June and by November more stocks were making new lows than new highs. As 2021 turned to 2022, fewer and fewer world markets were showing any strength. The second half of the year is shaping up to be a different story, with a breadth thrust in July and a sharp expansion in the percentage of world markets trading above their 50-day averages, the conditions that have fueled all of the net gains in the S&P 500 in the past 40+ years are now present. 

[PLUS] Weekly Momentum Report & Takeaways

August 15, 2022
Ian Culley

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

[PLUS] Weekly Top 10 Report

August 15, 2022
Ian Culley

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

New Lows Streak is Over

One thing that has been consistent this year is seeing more stocks hit new lows than new highs. We’ve witnessed this kind of bear market behavior every single week of 2022. Up until now, that is. For the first time all year, more stocks made new highs than new lows last week. This is a huge development because if the market truly bottomed and we’re in the early stages of a new uptrend, we’re going to need more new highs than new lows. It’s just math. Following 37 straight weeks of net new lows, seeing this streak come to an end is yet another big piece of evidence in favor of the bull camp.

[PLUS] Weekly Market Notes

August 15, 2022
JC Parets
From the desk of Willie Delwiche.

Key Takeaway:

  • Rally strengthens as participation broadens.
  • Risk environment is still cautious as downtrends linger.
  • Macro situation is a concern but has not been causing stress.

Breadth thrusts are firing, participation is expanding and for the first time this year new high lists are longer than new low lists. From the perspective of market internals, the rally over the past two months could hardly have been stronger.

This strength is showing up in our bull market re-birth checklist. July brought upside volume thrusts and the first breadth thrust (based on the percentage of stocks making new 20-day highs) in over two years. Last week brought to an end the string of 37 consecutive weeks of more new lows than new highs on the NYSE+NASDAQ. The trend in our net new high advance/decline line also turned higher.