From the desk of Steve Strazza @Sstrazza

Breadth divergences from earlier this year took a while to confirm, but once they did we saw considerable downside.

My Chart Summit Presentation was on how I use statistics and scans to visualize market internals for insight on breadth and relative strength. I used tables from our Weekly Momentum Reports in January and February to illustrate the clear deterioration in participation taking place at the time despite the major indexes grinding to new highs.

In this post, we’ll do a similar exercise and use stats to analyze whether breadth has been improving or deteriorating in Global Equity Markets over the past month.

From the desk of Steve Strazza @Sstrazza

Last month we wrote about the lackluster move from some of the cyclical sectors off of their March lows, particularly Industrials and Financials.

We continue to see weakness out of these areas over both long and short-term timeframes as Financials are pressing on all-time lows relative to the S&P 500 and Industrials just made a fresh relative 20-year low.

In this post, we'll take a look at these underperforming areas and share some trade ideas to express our bearish thesis.

First, let's take a look at the long-term relative weakness we just mentioned.

Click chart to enlarge view.

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 8, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

Many of the relative trends in stocks that have been in place for a long time have come into question recently as they're showing signs of maturing due in part to the change in leadership we wrote about this week.

In this post, we'll highlight two structural intermarket themes that have remained robust throughout this tumultuous time for equity markets.

The first relative trend that hasn't slowed down at all is the relentless outperformance of the US over the rest of the world. Our first table shows the Wilshire 5000 (DWC) dominating every Global Index over just about every timeframe, from this week to the trailing year.

Click table to enlarge view.

With Chart Summit India now almost a month in the rearview, I finally found some time to go back and rewatch some of the presentations.

Together with our partners, we hosted 20 amazing speakers and thousands of attendees and raised a remarkable amount of money to fight the COVID-19 pandemic. It was a really great event and an honor to be a part of.

With over 10 hours of content from some of the market's top technicians, I won't be able to do them all justice in just a short blog post so I highly encourage you to go watch all the full presentations for yourself. They can be accessed for free here.

With that said I'll try and do my best. Bruni recently wrote a post about some of his main takeaways from the conference which you can read here. I'm going to build on that today and share some of the things I found valuable from the handful of presentations I recently went back and watched.

From the desk of Steve Strazza @Sstrazza

There aren't too many charts in the Equity Markets breaking out of decade-long bases on an absolute basis right now...

This week's Mystery Chart was though, and the vast majority of you were buying it against former resistance turned support. We agree with that approach and would be doing the same here.

Thanks as always to all those who participated, but there's just one catch...

The chart was inverted! This means most of you were actually selling the breakdown in the Latin America 40 ETF (ILF).

From the desk of Steve Strazza @Sstrazza

There has been a lot of talk about the potential implications on the broader market if Mega-Cap Growth and Technology stocks were to lose their leadership. Since they have been responsible for driving much of the gains in the major averages for years now... we can only ask ourselves, who might pick up the slack if and when this happens?

In this post, we're going to analyze the top-performing areas today and compare them to their strength before the market crashed in February and March.

We'll also look at the leaders from back then and see how they're holding up today.

This will give us an idea of whether we really are undergoing a change in leadership or not, and if so, where the new areas of strength are.

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

From the desk of Steve Strazza @Sstrazza

Gold (GLD) broke out of a multi-year base last year and has more or less been trending higher since. No new news there.

But as JC explained in a post last week, Gold Miners (GDX) have finally broken out of a 7-year base as well after recently taking out resistance at key prior highs.

Today we're going to take a deeper look at the space.

We love setups like the one in Gold Miners right now. Not only did GDX resolve higher from a massive base but there is also a hefty amount of price memory at the breakout level which should act as solid support going forward.

Click on chart to enlarge image.

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 1, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

This week we're highlighting the underperformance from the US using our Global Index and International ETF tables.

Click table to enlarge view.

Despite the Wilshire 5000 (DWC) closing slightly higher on the week, all major Large-Cap averages in the US closed lower. While equities sold off across the board to end the week, the Eurozone still managed to book a nice gain with the German Dax (DAXX) and Stoxx 50 (STOXX) up 4-5% each in what was a short week for much of the region.

The Nikkei 225 (NI) and Shanghai Composite (SSEC) each closed almost 2% higher in what was also a short week for much of Asia.

From the desk of Steve Strazza @Sstrazza

Now that April is in the books that old Wall Street adage of “Sell in May and Go Away” is making its annual tour around the world of financial media. The reason this is such a commonly rehearsed phrase this time of year is that it was one of many seasonality trends first introduced by Yale Hirsch in his book, The Stock Traders Almanac.

The theory is rooted in historical research which shows that stocks tend to experience their worst performance between the months of May and October. Alternatively, the best months of the year typically occur between November and April, which is what we're going to cover in this post.

Notice how significant the disparity in average return is between these two six month timeframes.

From the desk of Steve Strazza @Sstrazza

There has been a lot of chatter about the outperformance from Health Care recently. One of the industry groups benefitting from this strength has certainly been Biotechs so we're going to dive into that space today and take a look under the hood.

This week's Mystery Chart is a long-term ratio chart of the Nasdaq Biotech ETF (IBB) relative to the Nasdaq 100 (QQQ). Thanks to everyone for participating. Responses were pretty mixed this week as the chart is at a bit of an inflection point as it tries to hammer out a bottom at key prior lows from 2007-08 and 2011.