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 red as 64% of our list closed lower with a median return of -0.33%.
• US 10-Year Yield $TNX was the winner this week, closing about 4bps higher at 1.78%.
• The biggest loser was Lumber $LB, with a weekly loss of -10.39%.
• There was a 4% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 30%.
• 53% of our macro list made fresh 4-week lows, 34% made new 13-...

From the desk of Willie Delwiche.

There was plenty of focus on the Fed this week - not so much for what they did (which was nothing), but for what they said. After a benign written statement, Fed Chair Powell took to the podium at his post-FOMC meeting press conference and spent a lot of time talking about how inflation has been more persistent than the Fed had hoped it would be.  From the Fed’s perspective it is now time to raise rates rather than to let the negative effects of sustained higher inflation fester in the economy. Data released in the wake of the FOMC meeting shows that higher inflation remains persistent, in terms of both degree and duration. 

Inflation based on the Trimmed Mean PCE is at its highest level since the early 90’s, based on the Core PCE it’s at its highest level since the early 80’s.There are only a few times in the history of this data that inflation has risen this many months in row. The only times we’ve experienced a more sustained rise in inflation were in 2012 (coming off the secular low) and in the 1970’s. So far this cycle the Fed has aided & abetted inflation, going forward it’s poised to fight it.

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This is the video recording of the January 27th Weekly Town Hall w/ Willie Delwiche

01/27/22 2:00 PM ET

From the desk of Willie Delwiche.

What a week…  

What a month…  

What a start to the year!

We’ve seen pockets of strength in the market. But by and large, it’s been a tough slog to start 2022. In the words of an All Star Charts colleague, it’s starting to look a bit like “no-man’s land” out there as stocks have tried (but generally failed) to produce some positive momentum after the worst start ever to a new year. 

Even if we were able to get back above some key levels, where would that put us? Back into the sideways mess that characterized most of 2021. Not breaking down is a necessary – but not sufficient – condition for breaking out.

From the desk of Willie Delwiche.

Key Takeaway: US stocks are on the ropes after taking a series of heavy hits in recent weeks. This comes against a backdrop of rising volatility and fear, fueling an increase in pessimism. A complete unwind from speculative extremes is underway as a market that once bent under pressure is now beginning to snap. The silver lining is that there are still pockets of strength among cyclical/value sectors, like energy. The question is whether or not this can remain the case in the face of widespread pessimism.    

Sentiment Report Chart of the Week: Leadership Rotation Gets Energetic

The energy sector is picking up steam despite the recent selling pressure among US stocks. The sector is having a great month to start the year (+17%) and this week saw one of the largest 1-day return spreads between XLE and XLK on record (22nd overall). In fact, seven of the top 25 events have come since the COVID-related market lows. After taking a backseat to tech for more than a decade,...

From the desk of Willie Delwiche.

Key Takeaways:

• Corporate bond yield momentum a headwind for stocks 
• Growth and inflation leave little excess liquidity for financial markets
• Fed poised to follow global central banks into tightening mode

Plenty of eyes are on the Fed this week. The decisions it makes this year with respect to tapering its asset purchases, beginning a rate hiking cycle, and the timing of its balance sheet wind down will reverberate through the financial markets. This week’s meeting is more about posture and communication than it is about action - even with that I would not be surprised by hawkish dissents from members of the committee who want to accelerate the time table for any or all of the decisions mentioned above. Before getting to possible equity market implications of interest rate hikes, we would do well to acknowledge that liquidity conditions have already begun to deteriorate. 

The long-term trend in the 10-year T-Note yield turned higher a year ago and the yield recently got to its...

From the desk of Willie Delwiche.

Key Takeaways:

• First 10% correction in two years signals the end of an extended period of relative calm for stocks.
• US breadth is slipping while global breadth is more resilient.
• Recent stock market volatility is unlikely to knock the Fed off course.

Breadth deterioration was not just a story for the second half of 2021, it has persisted, with twist, into 2022. The persistence: more and more stocks on both the NYSE and NASDAQ have been making new lows while fewer and fewer industry groups in the S&P 1500 have remained in up-trends. The twist is that while breadth trends in the US are deteriorating, global breadth has been more resilient. Nearly half of the stocks in the MSCI Europe index are trading above their 50-day averages while for the S&P 1500 it is less...

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:

• This week, our macro universe was red as 66% of our list closed lower with a median return of -2.22%.
• The Volatility Index $VIX was the winner this week, closing with a massive 50.34% gain.
• The biggest loser was High Beta $SPHB, with a weekly loss of -8.87%.
• There was a 29% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 26%.
• 51% of our macro list made fresh 4-week lows...

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.

Bears Take Control

Last week, we wrote about the importance of bulls defending the September highs in the S&P and other large cap averages. They didn’t. Instead, prices cut beneath these potential support levels with ease. Another area of importance we’ve been watching since last year is the 2021 lows in the Russell 2000. After being tested at least 6 times, sellers finally took control at this ~210 level in recent sessions. For now, none of the major averages in the US are above our tactical risk levels. We’ve seen a change in character during this correction as bears are becoming more aggressive. This is illustrated by momentum hitting extreme oversold conditions in all of the major indexes. We always want to respect our risk management levels, and currently they are telling us we can’t be long these indexes....

From the desk of Willie Delwiche.

When it comes to portfolio management, asset allocation matters. For many the starting point of this discussion of dividing assets between stocks and bonds. This leads to the often talked about 60/40 portfolio: 60% stocks and 40% bonds. From my perspective that is an incomplete opportunity set and decisions based on such an opportunity set are going to leave investors feeling underwhelmed. Stocks (VTI) and bonds (AGG) are important components, but commodities (DBC) and cash (MINT) need to be on the table as well. Commodities were the top performing asset class last year. Amid equity market weakness this week, commodities are moving to new highs (assets in up-trends tend to do that). Cash has been mocked recently as a guaranteed way to lose ground relative to inflation. That might be a small price to pay for the flexibility it can provide in the face of volatility elsewhere. Three consecutive years of 20%+ returns for equities can make investors financially and emotionally over-invested in stocks. Maybe it’s time to get back to the basics. Stocks. Bonds. Commodities. Cash. 

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This is the video recording of the January 20th Weekly Town Hall w/ Willie Delwiche & JC Parets

01/20/22 2:00 PM ET

From the desk of Willie Delwiche.

The number crunchers are reporting that workers have gone missing. Plenty of jobs are available. But no one is showing up to fill the open positions. 

They are calling this phenomenon the Great Resignation.

It makes sense if you’re looking at the situation through the lens of the established system. Folks are dropping out, which means they must be giving up. If they wanted to work, they would work.

But what if people aren't so much opting out of one system, but actually opting into a different one?