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.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
A Warning From Banks
With risk-seeking behavior increasing, Financials and banks are lagging behind and not participating to the upside in a way we’d expect. The chart below is an equal-weight representation of the six largest banks in the US. This index can act as a leading indicator for financials more broadly. The fact that the index has not been able to hold the 2007 highs in an environment where rates are rising globally is a concern. Throughout history, you don’t tend to see bull markets without financials. These are the largest and most important financial institutions in the world. Bulls want to see them carve out a bottom here and catch higher along with other cyclical stocks. It should happen soon if it’s going to.
The big news of the day is centered around an SEC filing by the wealthiest man in the world.
This morning, Elon Musk disclosed a 9.2% ownership stake in Twitter $TWTR in a 13G filing. Musk has amassed roughly 73.5 million shares for a value of almost $3 billion.
According to the filing, Musk has been buying since the middle of March.
The CRB Index is up 27.03% year to date while the S&P 500 and the 30-year Treasury bond aren’t even in the ballpark, posting lackluster performances of negative 4.95% and negative 6.25%, respectively.
Commodities are really the only game in town these days.
With that as our backdrop, we want to continue focusing on this asset class for buying opportunities.
As many of these contracts consolidate or correct following explosive upside moves, we’re paying extra attention to those that have been basing in recent months – such as natural gas.
Let’s take a look.
Here’s a zoomed-out weekly chart of natural gas futures:
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs. We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
We begin today’s discussion with a special situation that took shape this week.
At the end of the day, what we’re trying to do here is create a universe of stocks that are experiencing bullish activity from investors who have better information than the rest of us.
Typically, this information comes to us in the form of SEC filings, options flow, or through congressional reporting. But that’s not always the case!
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
It finally happened…
The yield curve inverted for a brief moment as the 2-year yield rose above the 10-year earlier this week.
But whether or not it inverted yet is beside the point. It’s been flattening for a long time, and that’s the direction we’re headed in. It's only a matter of time.
While media outlets and fearmongers will spin this development as an urgent warning of an impending bear market, here's what you need to know: Throughout history, equities have done well during and after inversions.
This commonly observed leading indicator has a tendency to precede major market tops by years, not months. In other words, there's still time. The average lead time is about 18 months after prior inversions.
More importantly, when it comes to forecasting bear markets and recessions, many experts will argue that it is actually not the 2-year we should be focused on, but the 3-month yield.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Rates continue to move higher around the world as central banks do their best to combat inflation.
As investors, our best course of action is to position ourselves in those areas that benefit most from rising rates.
Commodities and cyclical stocks immediately come to mind. But there are also specific currencies that tend to excel in rising rate environments.
Today, we'll discuss a handful of emerging-market currencies with heavy commodity exposure.
We’ve been waiting on these currencies to catch higher and confirm the price action in commodities since last year… and it looks like it’s finally happening.
Let’s dive in.
First up is an overlay chart of the US 10-year yield and our equal-weight basket of EM commodity currencies:
