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 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.

Rates Spike Around The Globe

Interest rates are on the rise, and it’s not just in the US and Europe. The Japanese 10-year yield hit its highest level in over five years last week. Like Germany, Japan is now back in positive territory after a half-decade of offering negative yields. All of this action is supportive of the new highs we’re seeing from the US 10-year yield. With rates on the rise around the world and the question turning into “how high” – as opposed to “if” – the FED will hike, it’s time to look for opportunities in the areas of the market that benefit the most from a rising rate environment.

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:

• Our macro universe was green this week, as 72% of our list closed higher with a median return of 1.53%.
• This week, US 10-Year Yield $TNX was the winner, closing with an 8.31% gain.
• The biggest loser was the Volatility Index $VIX, with a loss of -16.05%.
• There was a 2% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 28%.
• 13% of our macro list made fresh 4-week highs, 11...

From the desk of Willie Delwiche.

By looking at various ratios relative to where they have been over the past year, we get a sense of investor risk appetite from an intermarket perspective. The pairwise comparisons in our risk off - risk on Range-O-Meter show a decisive tilt toward risk off assets over the past month. A few (Staples vs Discretionary, Large-Cap vs Small-Cap, Yen vs Aussie Dollar) are nearing new 52-week extremes favoring the risk-off side of the ratio. We could get some near-term relief from the intense selling of January, some of that has been seen this week already. But if we are seeing broad and sustainable strength, I expect it will be evident by a decisive move toward the risk-on side of our range-o-meter.

This is the video recording of the February 2nd Weekly Town Hall w/ Willie Delwiche & JC Parets

02/03/22 2:00 PM ET

From the desk of Willie Delwiche.

It’s difficult to stay on top of things if you don’t periodically pause for reflection. 

What did you do yesterday that you want to do more of tomorrow? What do you want to do less of tomorrow? Rarely is any single day a make or break situation. But success over time is about leaning into the things that work and leaning away from the things that don’t work.

From an investing perspective, it’s about trusting prices and their trends. This involves tilting toward the parts of the market that are moving higher, while avoiding areas that are moving lower. It’s about avoiding “should” and dealing with “is”. The market is dealing with a negative reaction to disappointing data from several stocks that are in well-established downtrends as I type. That really shouldn’t be that big of a surprise. Stocks making new lows tend to be those in downtrends, while those making new highs tend to be those that are in uptrends. That’s the way the world works.

Last week I mentioned ordering seeds and starting to plan the summer garden. In addition to taking stock of what we had left from last year, we also had to...

From the desk of Willie Delwiche.

With the weight of the evidence turning neutral and our tactical risk management model arguing for more caution, we have reduced our equity exposure and raised some cash in our Cyclical and Tactical Opportunity Portfolios.

From the desk of Willie Delwiche.

Key Takeaway:  Investor sentiment looks washed out - at least for now. Investor sentiment was a headwind early in 2021 but more recently had been a neutral market influence from our weight of the evidence perspective. Now, with the indicators pointing toward fear and pessimism and equity inflows sputtering to start 2022, it looks like sentiment now is a tailwind for equities. How long that persists remains to be seen. Seeing pessimism and fear remaining elevated even as if stocks stop going down could help sow the seeds for an unloved rally. Longer-term, there remain imbalances from a valuation and asset allocation perspective that remain unresolved.   

Sentiment Report Chart of the Week: Equity Fund Inflows Sputter

Equity ETFs saw their 20th consecutive month of inflows in January, but last month’s inflows were the smallest since October 2020 and a sharp slowdown...

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, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

From the desk of Willie Delwiche.

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 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.

Testing Former Resistance

We've been pounding the table on the importance of defending the 2018 highs for a long time. These levels represent when risk assets peaked four years ago. The chart below shows the Value Line Geometric Index pulling back to its 2018 highs. This index measures the median stock performance and is an excellent way to view how the overall market is doing. Right now, it’s telling us that the average stock has endured significant damage and has erased almost all of the progress from recent years. Bulls really want to see these 2018 highs hold. If they do, the bias is still higher and the structural trend is intact. But if this level is breached, it will be a major bearish development for the broader market and risk assets in general.