From the desk of Willie Delwiche.

While many started to pay attention to the potential for equity market weakness well after the S&P 500 peaked back in January, a look beneath the surface showed that trouble had been brewing for a while. The percentage of stocks in the S&P indexes that were 20% or more below their highs stopped retreating in March of 2021 and started to rise over the second half of 2021. That intensified over the first half of 2022 and crescendoed to a peak in mid-June (at which point between 75% and 85% of stocks were in drawdowns of 20% or more). The pattern of higher highs and higher lows in this measure of stock market weakness is now being challenged. Already fewer stocks in the mid-cap S&P 400 are in 20% drawdowns than was the case in early June. Small-caps and large-caps aren’t far behind. Before sustained strength, we usually experience waning weakness. And that is what we are seeing right now.  

This is the video recording of the August 11, 2022, Weekly Town Hall w/ Willie Delwiche.

08/11/22 2:00 PM ET

From the desk of Willie Delwiche.

I don’t want to count my melons before they are ripe, but letting profits run in the garden looks like it’s going to pay off this year. 

Sorry for the mixed metaphors. This is what I’m talking about… 

I spotted a volunteer melon plant coming up next to the garage earlier this summer. In gardenspeak, a “volunteer” is something that comes up on its own, not because of a seed that was intentionally planted. It’s not in the best spot and I could have pulled it out right away. 

But I didn’t. I let it grow for a little while. Then a little while longer. Now I have an awkwardly-situated cantaloupe plant that covers 30 square feet. 

So why did I leave it?  

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

We adjusted our international equity exposure to stay in harmony with global leadership and are putting some money to work domestically following the late-July breadth thrust.

From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

Key Takeaway:

• Sustained market strength tends to be quiet.
• Noisy price swings can obscure underlying downtrends.
• Bulls holding serve on rally but hardly pressing an advantage.

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.

The New Leaders

Biotech continues to be among the top-performing industry groups over shorter timeframes. They were among the first groups of stocks to bottom back in May. They were also first in line to complete a reversal pattern back in June. 

This is illustrated by the double bottom in the S&P SPDR Biotech ETF (XBI) above. After digesting gains in a tight range for most of July, Biotech stocks are now resolving higher once again. We think the bullish resolution from this high and tight flag is a good roadmap for what other growth stocks and indexes are likely to do in the coming weeks and months.

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:

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

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.

Real Yields Roll in Favor of Gold

There has been plenty of evidence suggesting a significant breakdown in one of the world’s most critical inflationary assets, Gold. Miners look terrible, Silver and Platinum are weak, and the Silver/Gold ratio recently hit multi-year lows. These aren’t the type of data points that support higher gold prices. Real yields are another piece of evidence we can add to that list. The chart below shows the US 10-year real rate inverted and a chart of Gold. They look almost identical. Gold futures tend to trend lower when real rates rise (moving lower on the chart). Despite every reason to break down, Gold has remained resilient. And now, as many of the negative data points mentioned above begin to reverse, including real yields, a rally in gold could ensue.