In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Running Out of Gas
After failing to hold a breakout to new all-time highs earlier this year, gasoline futures have fallen by roughly 50% in the past six months. Last week, both crude oil and gasoline continued their slide by taking out their 2018 highs. As long as energy futures are below these prior-cycle highs, we want to approach the entire sector with caution.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
China Bulls Take Charge
Chinese equities have emerged as some of the unlikely leaders among global markets. In the last month, China Internet ETF (KWEB) and iShares China Large-Cap ETF (FXI) have risen 31% and 19%, respectively. Meanwhile, Emerging Markets (EEM) are only up about 8.5% over the same period.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Not All Indexes Are Created Equal
While the Dow (DJI) has rallied nearly 20% off its October lows and retraced more than 62% of its max year-to-date drawdown, the Nasdaq 100 (NDX) is only about 10% above its lows, representing a roughly 20% retracement.
This disparity in index performance speaks to the relative strength from blue chip value stocks as well as the relative weakness from technology. Until we see evidence of this changing, we want to remain overweight value and underweight growth.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Energy and Crude Diverge
Crude oil (CL_F) and energy stocks have been trending in different directions since this summer, but the gap between the two has become more pronounced during the trailing month. We’ve included the 100-day rolling correlation, illustrating how rare such a prolonged dislocation is. With the Energy sector XLE failing to hold above its June highs this week, this divergence becomes a more-concerning datapoint for energy bulls.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Dollar Strength Erodes
Sentiment, volatility, and momentum thrusts have all suggested an end to the US dollar wrecking ball. Now price action is confirming the data as the DXY resolves lower from a pennant formation to fresh multi-month lows. From a weight of the evidence standpoint, the dollar is done, and so are the accompanying headwinds for risk assets.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Equal Over Cap-Weight
The equal-weight S&P 500 (RSP) emerged to fresh multi-year highs relative to the cap-weighted S&P 500 index (SPY). Seeing this ratio break out of a multi-year base is a development that indicates a healthy expansion in participation and is further evidence of improving market internals.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Insurance Claims a Leadership Role
The Equal Weight SPDR Insurance ETF(KIE) just closed at its highest level since April. One thing we know about relative strength is that the stocks and indexes that hold up best during bear markets tend to be the first to make new highs when the selling pressure subsides. We think this group will continue to outperform in the future as it completes a failed head & shoulder top and is only 3% from fresh all-time highs.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
They Can’t Break the Banks
Unlike most industry groups, community banks never completed a top, as price has remained above the pivot lows from last year. Additionally, momentum has not reached oversold conditions during the current bear cycle. If this range remains intact, the world isn't coming to an end any time soon.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Bonds Lead
First bonds, then stocks, and now commodities have rolled over, following the traditional intermarket cycle. If the pattern holds, we should expect bonds to bottom first and eventually lead the way higher. With yields on the rise, there are no signs of this yet, but even a transition to a sideways trend could bring some stability to other asset classes.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Industrials Are Island Hopping
his is a zoomed-in look at the trailing month and a half of price action in the Sector SPDR Industrials ETF XLI. Industrials have the tightest historic correlation to the major averages in the US, so the index provides valuable information for the overall equity market.
Industrials just printed a failed reversal pattern, making for an excellent illustration of the choppy and trendless environment we’re in.
Earlier in the month, XLI launched higher from an island reversal formation. However, there was no follow through and the move immediately stalled. Friday, prices gapped right back into their old range, forming yet another island reversal.
We’re watching the pivot lows around 82.75. If we take those out, we’re likely to get a fresh leg to the downside. This is not just true for Industrials, but the broader market.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Dow Leads Down
Not only is the Dow trading at its lowest level since November of 2020, but momentum is confirming the move with its lowest reading since the COVID-crash back in Q1 of 2020.
The summer lows we’re watching coincide almost perfectly with the pre-COVID highs around 29,600. This confluence of interest reinforces the importance of the current level. As long as the indexes are below their summer lows, sellers are in control.
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 Quarter Century of Sideways
We like to use the Value Line Geometric Index as a representation of how the average, or median stock is making out. While the S&P might be a better illustration of the performance of an average portfolio, the Value Line shows us the performance of the average stock.
With prices cratering back beneath key prior-cycle highs, it’s not painting a very bullish picture for the broader market. These dot-com bubble and financial crisis highs ~510 are as important as any level in the stock market right now. If we’re below there, downside risks are elevated, and we’re on the sidelines. The fact that the median stock price has made zero progress since its 1998 peak almost 25-years ago tells you all you need to know about the damage the overall market has already endured. As long as VLG is below these former highs, we want to be prepared for more to come.
