From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

We’ve recently pointed out the possible double tops in the Dollar index and the USD/CAD, along with our overall outlook for further weakness from king dollar.

But can we find other areas of the market that could provide further insight into the US Dollar’s direction?

After all, many market participants are fixated on the direction of the US Dollar right now as it approaches its key mutlti-year lows.

Why does the Dollar matter so much to investors?

Firs of all, USD and risk assets have had a very strong negative correlation over the last several years. The USD Index bottomed in early 2018 as stock markets around the world peaked. Conversely, the dollar topped during the Covid sell-off when stocks bottomed out at their March 2020 lows.

To gain a clearer picture of the USD, we need to go beyond the Dollar Index and developed currencies.

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We've already had some great trades come out of this Small-Cap focused column since we launched it late last year and began rotating it with our flagship bottoms-up scan, "Under The Hood."

To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. After applying price and liquidity filters, we simply sort by proximity to new highs in order to focus on the best players.

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 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.

Macro Universe:

From the desk of Steve Strazza @Sstrazza

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.

Europe Stands Strong On The Global Stage

European equities are in the process of staging a reversal relative to global equities after forming a formidable base. If this ratio of the FTSE Europe ETF can decisively move above this downward sloping 7-year trendline, this would confirm the beginning phases of a new structural uptrend for a region that has acted as a perennial laggard in a Growth dominated environment.

Now that we’re finally witnessing rotation into Value areas like Financials and Natural Resources, Europe no longer is being anchored down by its constituents. That exposure is swiftly becoming a powerful tailwind.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Gold has been one of the last places we have wanted to put our money over the past eight months, second only to Bonds.

Other areas of the commodities space, like Base Metals, Energy, and Ags, along with risk assets in general have experienced an explosive rally. While Precious Metals have gone nowhere. But are we starting to see signs that this could be changing?

Last week we pointed out that Lumber had reached our target and could be due for a pullback. And we’re seeing that play out.

The previous week we noted that other procyclical commodities within the Base Metals group were also reaching our targets and testing areas of potential resistance. And like Lumber and so many other risk-assets, they remain trapped below key levels of overhead supply.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

Check out our latest Mystery Chart!

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 of 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?

From the desk of Louis Sykes @haumicharts and Steve Strazza @sstrazza

The Crypto space just experienced its worst day since the height of the Covid crash.

Bitcoin was down over 30% on an intraday basis, while Ethereum was almost cut in half.

We see this recent action aligning Crypto with what's taking place throughout the market. Bulls have had a more challenging time in recent months, and risk assets are coming under increasing pressure. 

Speaking to this topic, here's what we outlined in a note earlier this week:

One more chart that I think is interesting is the Bitcoin / Gold ratio hitting it’s upside objective and reversing hard.

How many people are telling you to sell Bitcoin to buy Gold?

I don’t hear any at all….

If we’re below 36:1 in the ratio between Bitcoin and Gold, then we prefer Gold.

From the desk of Steve Strazza @sstrazza

As the market has become increasingly mixed, it's time to switch up our strategy a bit.

As we outlined in our post yesterday, for the first time in about a year, we are shorting stocks.

But this statement requires an asterisk...

We are shorting some stocks. And at the same time, we're still buying the leaders as plenty of stocks continue to show impressive strength -- particularly those with cyclical or value characteristics. That's where we're focusing for long ideas.

As for shorts, it's all growth. That is where the weakness is. We're not only seeing deterioration and relative weakness at the index level for growth stocks -- the internals are also deteriorating beneath the surface.

This is simply a tale of two markets. As growth-heavy averages like the Nasdaq roll over, the leadership areas are registering bullish breadth thrusts and carrying on higher like business as usual.

From the desk of Steve Strazza @sstrazza

First of all, thanks to everyone as always for participating in this week's Mystery Chart.

As noted in the Mystery post last week, the rounding bottom in question is a pattern we've become all too familiar with since last year.

The reason for this is simple: The chart was merely a derivative - or just another way to illustrate and visualize the overarching theme that's driving so many of our cross-asset relationships these days... The sustained rotation out of Growth  and into Value.

We've written a lot about this theme since last year, and more recently have been pounding the table on a new theme that's taken the forefront for markets across the globe... We believe we're in for a trendless or rangebound period for risk assets as well as an increasingly bifurcated or mixed market. 

Much of this divergence in performance among various groups can be directly attributed to this trend toward value and away from growth.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

One of the most frustrating questions plaguing investors at the moment is... "How long will this choppy environment last?"

And one question we’re asking internally is… “What is with all these mixed signals!?”

Once the latter clears itself up, we'll have our answer to the former... But not until then.

When the outlook becomes increasingly murky, the best action is to take a step back, let the smoke clear, and weigh each new piece of evidence as it becomes available.

For now, the most important evidence we have is our list of risk-on commodities and equity indexes testing critical levels of interest grows larger by the day.

There seems to be no end in sight. Complicating matters further, we’re actually seeing this kind of price action throughout the risk asset landscape. It's not isolated to a single asset class or region. We're seeing it in Stocks, Bonds, Commodities, and even Currency Markets... and not just in the US, but also abroad.

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest "Under The Hood” column for the week ended May 14, 2021. This column is published bi-weekly and rotated on-and-off with our Minor Leaguers column.

In this column, we 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.

From the desk of Steve Strazza @Sstrazza

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.

Will Bonds Follow The Path Of Bullion 

A few weeks ago, we put out what you could call a “lower conviction” trade idea in Gold Miners. The reason we did this was simple and boiled down to two things: 1. The risk/reward profile; and 2. The primary trend. The prior was simply too good to ignore as price tested a formidable level of former resistance turned support. And this was taking place within the context of an underlying uptrend. Fast forward to today, and that trade has worked out beautifully (see lower pane).