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.

Cyclicals Shine

In recent week’s we’ve witnessed a slew of former leadership groups -- mostly growth sectors, achieve our targets and begin to roll over. This might have been a more concerning development if we weren’t witnessing value and cyclical stocks pick up their slack so aggressively. Over the past couple of weeks, we’ve seen energy stocks rebound and make a swift move off support as well as financials rally back to fresh all-time highs. More recently, we’re now seeing industrials and materials dig in and rally off their year-to-date lows. Once again, the bears had some charts looking vulnerable, and failed to make their move. Now it appears that bulls are back in the driver seat and value stocks are poised to take on some leadership. This theme is illustrated well by the strength in our equal-weight custom cyclical index, below.

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From the desk of Willie Delwiche.

Key Takeaway: Energy and Financials looking for friends. Bonds remain under pressure, with German yields rising toward the highest level since 2019. Breadth is no longer a relative laggard.

• Energy and Financials switched spots this week but remain at the top of the relative strength rankings, with leadership evident across time frames and market cap levels. Over the past three months, no other sector is up more than 1%. The Financials sector is up 6% and Energy is up 8%.
• Our industry group heat map shows notable strength in Energy and Banks. Health Care, Technology and Telecom groups are coming under pressure.

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.

• This week, we saw our macro universe lean positive as 62% of our list closed higher with a median return of 0.51%.
• Lumber $LB was the big winner, closing out the week with a gain of more than 15% and registering a fresh 13-week high.
• The biggest loser this week was the Volatility Index $VIX, with a loss of -11.25%.
• This week, we saw no change in the percentage of assets on our list within 5% of their 52-week highs (currently at 47...

From the desk of Willie Delwiche.

We like to say that dollars flow to where they are treated best. If that is the case, commodities could soon see a surge of inflows. The DBC/AGG ratio shows commodities surging to new multi-year highs versus bonds and the DBC/SPY ratio shows strength versus stocks as well. DBC has more than doubled up SPY on a YTD return basis (43% vs 18%). Commodities are proving again to be a place of relative safety when inflation and bond yields are on the rise. For many investors, commodity exposure isn’t even included as part of the asset allocation discussion. At least, not yet.

This is the video recording of the October 7th Weekly Town Hall w/ Willie Delwiche

10/07/21 2PM ET

From the desk of Willie Delwiche.

My team just participated in our final cross country race of the season, and I was thrilled with our performance. 

Our focus this season was effort and the improvement that follows. This week, our runners delivered. Big time! 

We had 17 athletes compete. Of this group, 13 matched or posted their best time of the season -- a few by wide margins. 

These accomplishments didn’t show up on the leaderboard. The most competitive runners on the top teams ran mile after mile over the course of the summer. As you would expect, they received their fair share of medals and accolades. 

But for us, it was a race full of individual victories.  

From the desk of Willie Delwiche.

With our latest Weight of the Evidence Dashboard improving and now signaling a neutral stance, we have put cash to work across our portfolios to reflect a more balanced approach.

From the desk of Willie Delwiche.

Key Takeaway: The risks associated with excessive optimism are no longer present as bulls are in full retreat. Recent spikes in volatility and downside pressure on price have ushered in an atmosphere of caution.Though we haven’t reached levels of fear or pessimism indicative of a complete unwind, active equity managers reducing their exposure to 55% and the II bull-bear spread at its lowest level since May 2020 speaks to a healthy reset. Relentless equity ETF inflows, elevated valuations, and slowing earnings growth all point to increased risks over longer timeframes. However, we are seeing early signs of opportunity re-entering the market from a tactical and cyclical perspective.

Sentiment Report Chart of the Week: Fade the flows

Equity ETF inflows continued in September (16 months in a row) while commodities remain an unloved asset class from an ETF flow perspective. The equity space certainly looks crowded from a longer-term perspective. Weekly data...

From the desk of Willie Delwiche.

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.

• This week, we saw a resumption of weakness in our macro universe, as 70% of our list closed lower, with a median return of -0.70%.
• The Volatility Index $VIX was the big winner, closing out the week up more than 19% and registering a fresh 13-week high in the process.
• The biggest loser this week was the Nasdaq 100 $QQQ, with a loss of -3.52%.
• We saw a 17% drop in the percentage of assets on our list within 5% of their 52-week highs...

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.

Last week we had a major development for risk assets as the US 10-year and US 5-year yields made decisive moves higher from their recent consolidations. Now this week, we have another significant resolution to talk about… Crude Oil just blasted through its 2018 highs around 76. This is all a part of the reflation, global growth, and reopening trade. The fact that oil was able to do this in the face of a rising dollar only makes it more bullish in our opinion. It’s also worth noting that Energy stocks and other energy futures besides crude are much more supportive of this price action than they were when crude last tested this level back in July. At that time, futures weren’t confirming and energy stocks had already rolled over after peaking in June. This time around, things look much different. We think the breakout sticks, but we need to see some follow-through from price to confirm it in the...

From the desk of Willie Delwiche.

Key Takeaway: Price volatility fueling sentiment reset. Indexes under pressure as the tide turns against their largest components. Positive breadth divergences lacking.

• Higher rates are fueling strength in Energy and Financials - leadership from those sectors can be seen across market cap levels.
• Our industry group heat map shows continued deterioration from large-cap groups and improvement from small-cap groups. Some 8% of large-cap groups made new 13-week highs last week vs 42% that made new 13-week lows. Among small-cap groups, it was 17% at new highs and only 13% at new lows.