From the desk of Willie Delwiche.

"If you board the wrong train, it is no use running along the corridor in the other direction."

• German pastor and Nazi resistor Dietrich Bonhoeffer

If the train you are on isn’t going where you want to go, changing locations on the train is of little use. You are still going to wind up in the wrong place. 

Sometimes, we believe a train is heading to one place, when it’s actually going somewhere else. Or, after boarding, our view of where we would like to go changes entirely. In either case, we are on the wrong train and need to think about how to get off. 

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Custom Risk On / Risk Off Ratio breaking out of an 8-month consolidation
• Risk On environment favors Emerging Market strength and leadership from Financials
• Intermarket analysis shows higher risk assets outperforming across multiple timeframes

Our ‘Risk On’ / ‘Risk Off’ Ratio is getting back in gear after spending most of 2021 going sideways. The ratio first peaked in February and while it visited and revisited that level multiple times as Spring became Summer, which then became Fall, it had not been able to break out until last week. The improvement in the ratio has been fueled by both an up-turn in the ‘Risk On’ index and a more pronounced down-turn in the ‘Risk Off’ index. On the following pages we will take a closer look at what is driving improvement in one and deterioration in the other.

• Paying attention to relative strength can help in two ways. It identifies leaders, to whom active investors can tilt toward, and laggards, from whom those same investors can tilt away. Up and down the size scale, Energy and Financials are leaders, while Utilities, Health Care and Consumer Staples are laggards.
•  At the industry group level, mid-cap groups are seeing improving relative strength, while large-cap groups are seeing their relative strength deteriorate.

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.

Intermarket Confirmation For Interest Rates

In recent weeks we have witnessed rates break above 1.40% and crude oil achieve its highest level since 2014. One of many missing pieces for the intermarket puzzle is the Copper/Gold ratio, which has been chopping sideways since risk assets peaked back in May. This week, we got an upward resolution, which suggests that base metals will continue to outperform precious metals. But it also suggests we’re entering an environment conducive to higher rates and higher prices for commodities, in general. This is a constructive pattern breakout that supports the global growth and reflation narratives.

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.

From the desk of Willie Delwiche.

If there is something to know about me when it comes to the market, it’s this: When I have a chance to talk about the Value Line Geometric Index, I don’t let it pass. The Value Line index is still a smidge further below its June high than the S&P 500 is from its September high, and the Value Line index has not (yet) re-claimed the lead on a YTD return basis. But over the past month, it has provided some leadership, showing the S&P 500-based indexes the path through the 50-day average. While the cap-weight index (SPY) has changed little over the past month, the equal-weight index (RSP) is up nearly 2% and the Value Line index is up more than 3%. I continue to believe that will be the theme of the fourth quarter.

This is the video recording of the October 14th Weekly Town Hall w/ Willie Delwiche

10/14/21 2PM ET

From the desk of Willie Delwiche.

It's mid-October and things are winding down in the garden. 

The greens have perked up as the weather has turned cooler. But attempts to ripen a few final tomatoes as the summer heat fades and the sun spends less and less time above the horizon is like waiting for Godot.

With peak garden season slowing down, I have enough time (and thyme) on my hands to reflect on what went well, and what went awry.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Analysts and economists no longer chasing reality higher
• Downward earnings revisions coming with stocks priced for perfection
• Persistent inflation and higher bond yields would be a new experience for many investors

The past year has been one of widespread earnings surprises and large upward revisions. Whether those trends can remain intact as Q3 earnings season gets underway is one of the more important questions the market has to wrestle with right now. Expectations are elevated going into the quarter, but a number of the factors that fueled the earnings strength of the past year are starting to ebb. I have my suspicions that Q3 earnings season will be a repeat of the recent past.