From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest "Under The Hood” column for the week ended April 30, 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.

Whether we’re measuring increasing interest based on large institutional purchases, unusual options activity, or simply our proprietary lists of trending tickers… there is a lot of overlap.

The bottom line is there are a million ways to skin this cat. Relying on our entire arsenal of data makes us confident that...

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.

On a global scale, recent weakness has primarily been isolated to the Asia-Pacfic region. This region has in large part been weighed down by the Large-Cap Growth-heavy Chinese market; while many indices have decisively accelerated to the upside in recent months, China is still painfully below its YTD highs.

From our perspective, given the economic significance of China, we need to see buyers defend this key 45 level in the iShares China Large-Cap ETF. In this sense, the resolution from this level will likely dictate the bias for global markets in the coming weeks and months.

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.

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

One major theme that we’re watching closely right now are the growing number of risk assets at or near critical levels or key former highs.

We continue to see a variety of world stock market indexes approach crucial inflection points. As the list keeps getting longer, our cautionary view of the potential for further choppiness in many markets gets stronger.  

Where prices resolve from here in major indexes like the MSCI Emerging Markets, EAFE -- and even some major domestic indexes such as the Russell 2000, are about to provide us with some big-time information into the health of global equities and risk-assets in general.

Today, we’re going to look at one of these diversified international indexes that finds itself in this same boat as it approaches its pre-financial crisis record highs.  

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

Are Softs finally showing signs of life?

Base Metals, Grains, and even Energy have posted strong rallies over the last year. Yet the Softs -- Cocoa, Coffee, Cotton, and Sugar -- have continued to struggle below overhead supply.

But we’re seeing all the traditional signs of a structural trend reversal from this lagging group right now.

Let’s take a closer look at Coffee futures to pinpoint why we believe this bear-to-bull trend change is underway… 

Here’s a weekly chart of Coffee: 

Coffee futures have been in a nasty downtrend for almost a decade. But that no longer appears to be the case as they recently broke above a decade-long downtrend line in early February, signaling a potential...

From the desk of Steve Strazza @Sstrazza

We've covered the Growth vs Value relationship ad nauseam since late last year.

We continue to believe that a structural trend reversal in favor of Value is underway.

We laid out our thesis and the key level we're watching to potentially prove it wrong... That is and has been 1.70 in the Russell Large Cap Growth vs Value ratio.

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… all would have been on this list at some point during their journey to becoming the market behemoths they are today.

When you look at the stocks in our table you will notice...

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

A growing number of domestic and international markets are running into key levels of interest. 

This is a theme we’ve discussed at length over the past six weeks. We've also discussed how we see similar developments in the Commodities and Fixed Income markets.

With this as our backdrop, are you surprised that we're also seeing similar action in the Forex markets right now? 

We aren’t! 

In this post, we'll highlight two traditional risk-on currency pairs, both of which are trading at critical inflection points. 

Let's dive right in.

First up is the AUD/JPY cross. This FX cross is the classic risk-on/risk-off gauge within the currency markets -- and since last November, it has been sending a clear message of “risk-on!”

...

From the desk of Steve Strazza @sstrazza

At the beginning of each week, we publish performance tables for a variety of different 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.

The weight of the evidence still suggests it's prudent to be a buyer, not a seller, of risk assets for more meaningful time horizons.

Shorter-term, the market looks increasingly messy. For the first time in over a year, defensive assets are beginning to stabilize at logical levels of support, while stocks and major risk groups achieve our upside targets. Even a handful of some key Intermarket ratios are potentially diverging from the broader averages.

The macro backdrop definitely leans that this is just a sideways consolidation in an ongoing uptrend.

Let's not forget that the S&P 500 has just recorded its greatest 52-week gain since the late 1940s, so some...

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 Steve Strazza @Sstrazza

In our continued effort to identify individual equities that fit within our larger Macro thesis, we recently rolled out our latest bottoms-up scan: "The Minor Leaguers."

We write a post every other week where we outline some of our favorite setups from this universe of stocks.

We've already had some great trades come out of this column and couldn't be happier about the early feedback.

Moving forward, we'll be rotating this column with "Under The Hood" each week.

Ultimately, to make the cut for our Minor Leagues list, you must have a market cap between $1 and $2B. There are also price and liquidity filters.

Then, we simply sort the stocks by their percentage from new highs. Easy done.

The idea is to catch the strongest names while they're still small and have serious upside potential. If any of these stocks ever climb up...

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.

The Growth Vs Value Cheat Code

We’ve pounded the table about that 1.70 level being the line in the sand for the relative trend in Growth vs Value. If we’re below there - which we believe we’re likely to remain, then we want to continue to be overweight Value and cyclicals. If the ratio decisively reclaims this level then we’ll have to rethink our entire thesis, along with that of a new Commodities Supercycle. But, that’s not the bet we’re making at all.

The chart below shows Growth vs Value (IWF/IWD) overlaid with Tech vs Financials (XLK/XLF) as these are the main drivers of the two factors. We believe there is incredible information in the Tech vs Financials ratio. It was tested, and successfully defended in both April and June of last year, as well as again in early March of this year. Clearly, this area is a battleground for this relative ratio… And...