From the desk of Willie Delwiche.

Momentum fades but firming economy keeps evidence bullish.

From the desk of Willie Delwiche.

Key Takeaway: Market volatility has not interrupted rotation to new leadership. Long-term breadth remains robust, but shorter-term trends are in need of repair. Earnings and economic data continue to supply the market with positive surprises.

The Industrials sector made a big jump in our relative strength rankings this week, moving from 7th to 3rd among the large-cap sectors. Elsewhere, Consumer Discretionary continued to lose relative strength and Materials dropped out of the top five. Technology remains highly ranked (2nd overall) but on a short-term basis, it has been a market-laggard. If it cannot re-assert strength soon, its time in the leadership group could be winding down. Our industry group heat map shows overwhelming relative strength from small-cap groups (nine of the top ten & only one in the bottom ten) and widespread relative weakness in large-cap groups (none in the top ten and seven of the bottom ten). Deteriorating trends in the Technology groups...

From the desk of Steve Strazza 

Don't miss this weeks Momentum Report; our weekly summation of all the major indexes at a Macro, International, Sector and Industry Group level. As a reminder, we analyze this shorter-term data within the context of the structural trends at play.

From the desk of Willie Delwiche.

There are plenty of ways to take apart and dissect the move in the bond market that accelerated over the past week. From an investment perspective, if the 11% YTD decline in TLT holds, Q1 statements are going to be a jolt for investors who were led to believe that bonds are a portfolio stabilizer and that you can't lose money in Treasuries. From a market perspective, bonds are putting pressure on the Fed. It’s not yet showing up in the CPI, but Fed officials claiming not to see any inflation pressure strain credibility. It's not the rise in yields at the long-end of the curve that will catch the Fed’s eye, but the move higher in the belly of the curve. The short-end remains anchored by Fed actions, but this week saw 3-year, 5-year, and 7-year yields spike. The 5-year yield is approaching resistance at early 2020 levels, while relative to the 2-year yield (which is responsive to Fed policy) the 5-year yield is at its highest level since 2017. For all the talk of central bank omnipotence and bazookas, the bond market > Fed balance sheet. The Fed may need to adjust its approach.

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From the desk of Steve Strazza.

Our Top 10 report was just published; our weekly report highlighting the best 10 ideas and respective charts we are seeing across the markets this week.

1. Weakening Internals In The World’s Top Index

We’ve been vocal about the strong internals supporting US Equity markets and have pounded the table on one historic breadth reading after the next as they’ve continued to pop up in a variety of the major indexes and sectors since last summer. Surprisingly enough, one of the indexes that did NOT experience bullish initiation thrusts was the Nasdaq 100. This is likely because of the fact the bar was already set so high for this index due to its strong performance in years past. Regardless of the reason, unlike indexes that did experience thrusts, we’re paying attention to divergences in many of the Nasdaq’s breadth indicators. There’s been a notable deterioration in participation beneath the surface in what’s been the world’s strongest stock index for years. With the index finally showing some weakness and appearing to cede its leadership role to some of the more...

This is the video recording of the February 25th Town Hall Meeting w/ Willie Delwiche & JC Parets.

02/25/21 2PM ET

From the desk of Willie Delwiche.

Key takeaways:

• Previous leaders have been overwhelmed by strength elsewhere
• Market following those who are stepping into the fray
• Market dynamics working against passive investors

Have the generals lost their way? Maybe not in an absolute sense, but definitely relative to where the action on the battlefield is taking place. More importantly, does this doom the army to defeat? 

Market discussions of generals and their armies usually focus on whether the army is retreating as the generals advance. A very different situation is playing out currently. The mega-cap leaders that have been pacing the market for years (a trend that intensified this time last year as the shock of COVID overwhelmed the world) have been bogged down even as other areas of the market have heated up. So far, at least, it has been a case of marching in place more than actually sustaining losses. Upward pressure on bond yields and the emergence of better opportunities elsewhere could...

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From the desk of Willie Delwiche.

Key Takeaway: After record strength, breadth is taking a well-deserved breather.

This has the hallmarks of digestion more than divergence, especially after recording yet another breadth thrust. Re-opening optimism is running high and bond yields around the world are climbing.

With earnings and economic expectations still being revised higher, the path of least resistance for stocks remains higher even if we are starting to see a few more tripping hazards.

The Financials sector took over the top spot in our large-cap relative strength rankings even though leadership has not been as evident at the mid-cap and small-cap level. Our industry group heat map shows that while banks are improving at all cap-levels, no Financials-related industry groups are near the top of the rankings. Energy climbed into the third spot in our rankings, strength that is supported at the mid-cap & small-cap level. Technology remains in the leadership group, but...

From the desk of Steve Strazza 

Don't miss this weeks Momentum Report; our weekly summation of all the major indexes at a Macro, International, Sector and Industry Group level. As a reminder, we analyze this shorter-term data within the context of the structural trends at play.

From the desk of Willie Delwiche.

Constructing a narrative can be risky behavior if you end up trusting the story more than the incoming evidence. When you can remain objective, however, it allows you to position for an expected outcome and then test whether that outcome is being realized. Form a hypothesis and test it. Know your parameters beforehand, don’t seek to justify the action after the fact. If the facts change, change your mind. We’ve been discussing the prospects of a global coordinated rebound in growth. The evidence at hand suggests we are indeed seeing that. I see the chart below as the who, what, where, and how of this story. FCX is mining for Copper in EEM using CAT. If any of these start to falter, it will suggest the story is changing. Currently, that is not the case.

This is the video recording of the February 18th Town Hall Meeting w/ Willie Delwiche & JC Parets.

02/18/21 2PM ET