From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
In last week’s Currency Report, we highlighted the NZD/USD cross as a means to express our bearish US dollar thesis.
The setup was too good to resist taking a swing at following the recently failed breakdown. And so far, we’ve been rewarded for it. That’s information.
But it’s not the only cross that continues to trend well against the US Dollar. We see it all over, and it’s only reinforcing our bearish thesis.
As such, we want to look for more opportunities to take advantage of this developing theme.
In this week’s post, we’re going to do just that.
Let’s drill into our forex universe now and identify some of our favorite risk/reward setups we want to bet on to capture profits from a weakening US dollar.
As the third quarter winds to a close, the bulls just took the lead for the first time since early in the 1st half.
Everything is clicking for them and they're in control of the game right now. While it's been a nice comeback, it's still just 52 to 48, so they have plenty of work to do.
I'm not talking about basketball. Not the Chicago bulls. I'm referring to stock market bulls and the current score on our risk checklist.
It's currently at its highest reading since we started publishing it back in June, so we'd be remiss not to write about it.
It's been a great roadmap for us in recent months so let's have a quick look at what it's saying now as well as some of the more recent developments that have taken place.
From the desk of Steve Strazza @sstrazza and Ian Culley @ianculley
In last week’s Commodity Report we highlighted the Uranium ETF $URA and promised to dig up some trade ideas within this outperforming group of stocks.
While everyone was enjoying the Labor Day weekend, barbecuing, and watching football - we were pouring over our Uranium universe to uncover the best risk/reward opportunities in the strongest names.
But hey, this is what we love to do!
So let’s dive right in and see what we found.
First of all, why do we like Uranium so much right now?
Both the Uranium ETF and the underlying commodity are showing leadership and breaking out of 6-year bases. That's more than good enough for us.
Welcome back to our latest "Under The Hood" column where we'll cover all the action for the week ended September 3, 2021. This report is published bi-weekly and rotated on-and-off with our "Minor Leaguers" column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
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 context of the big picture 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.
Our Top 10 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.
It’s Bear Hunting Season
In our monthly candlestick review, the primary theme was the long list of all-time highs. That’s never bearish. But when we looked toward the weaker areas, despite lagging behind, they’re all holding critical levels of support. When the bears can’t drag down even the worst areas, that’s information. Precious metals, energy, or in this case, airlines whipsawed below support, only for bulls to come out and reclaim control.
As illustrated here, we got about as strong of follow-through as the bulls could have wished for. Again, the fact that so many of the weakest areas just won’t break down is incredibly constructive. If bears can’t even take out airline stocks, how can they ever grab a hold of the broader market? You have to start somewhere, and right now they’re moving backward.
We questioned whether it was a rounding top reversal pattern – in which case we’d be looking for a breakdown.
Or, if it was actually a failed breakdown - and we all know what tends to follow those patterns…
The responses we received were mixed. But there were plenty of bulls who wanted to be long against the former lows and bet on a swift reaction higher.
That’s pretty much the camp we were in too. We recently wrote about all of the whipsaw action we’ve been witnessing.
We said the next critical piece of information we’d be looking for was whether or not these patterns would see some real follow-through and confirmation.
Fast forward a week or so, and we definitely have our answer.
So let’s talk about it, and more importantly, what it means for risk assets.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.
As we were reviewing our charts, there was one recurring theme that kept popping up...
Pullbacks and retests.
The CRB Index retested its breakout zone near the 2018 highs ~206.
Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions.
Iron ore fell right back to check in on its 2013 highs.
And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline.
But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.
Of all these retests, one that stood out most was Uranium.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Mixed signals have been the rule rather than the exception since the market peaked in early February.
The major stock indexes have continued to print record highs while breadth has deteriorated beneath the surface, creating several bearish divergences.
Some stocks have gone up and some stocks have gone down. But the reality is that most stocks have gone nowhere.
The same is true for commodities.
We’ve noticed pockets of strength in base metals, livestock, and softs. But the majority of commodities have remained range-bound since the beginning of May.
The S&P 500 and the other US large-cap indexes have continued to grind to new highs all year, completely unphased by any of the deterioration in breadth beneath the surface.
But, when looking at the global stage, things are different…
In this post, we’ll look at the current state of market breadth around the globe and discuss whether internals are supporting the new highs in many international indexes.
It's always a worrying sign when price is making new highs at the index level with a lack of confirmation from internals. But that simply isn’t the case for ex-US equities these days.
In fact, it’s just the opposite, as we’re seeing our breadth metrics support and confirm the recent price action on a global scale.
Here we’re looking at the percentage of developed and emerging markets above their 50-day moving averages:
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.
In our last report, we discussed all the whipsaws we had been witnessing in recent weeks and noted that the next major piece of information would be the velocity of the reactions these charts made in the opposite direction.
What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be any security, in any asset class, on any timeframe. Sometimes, it’s an absolute price chart. Other times, it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So let us know what it is… Buy, Sell, or Do Nothing?
