From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts 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.

Intermarket Confirmation For Interest Rates

In recent weeks we have witnessed rates break above 1.40% and crude oil achieve its highest level since 2014. One of many missing pieces for the intermarket puzzle is the Copper/Gold ratio, which has been chopping sideways since risk assets peaked back in May. This week, we got an upward resolution, which suggests that base metals will continue to outperform precious metals. But it also suggests we’re entering an environment conducive to higher rates and higher prices for commodities, in general. This is a constructive pattern breakout that supports the global growth and reflation narratives.

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts 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.

Cyclicals Shine

In recent week’s we’ve witnessed a slew of former leadership groups -- mostly growth sectors, achieve our targets and begin to roll over. This might have been a more concerning development if we weren’t witnessing value and cyclical stocks pick up their slack so aggressively. Over the past couple of weeks, we’ve seen energy stocks rebound and make a swift move off support as well as financials rally back to fresh all-time highs. More recently, we’re now seeing industrials and materials dig in and rally off their year-to-date lows. Once again, the bears had some charts looking vulnerable, and failed to make their move. Now it appears that bulls are back in the driver seat and value stocks are poised to take on some leadership. This theme is illustrated well by the strength in our equal-weight custom cyclical index, below.

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts 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.

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.

Resolutions For Rates

This could be the single most important chart in the world right now. We cannot understate this development.

We finally got a major resolution in the US 10-year yield, reclaiming that critical 1.40% level this week. And this begs the question as to what a rising rate environment might mean for investor portfolios. The first thing we know for sure is that we want to stay away from bonds, unless we’re shorting them of course. The second, and perhaps most important implication, is the renewed tailwind for cyclicals. When rates are rising, sectors like financials, industrials, materials, and energy are all typically outperforming, which is exactly what we’ve started to see in the last week.

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.

Is This Drawdown Any Different?

The S&P 500’s 50-day moving average has garnered some attention this year, and for good reason.

During every month except April, the S&P 500 has tested its 50-day average. Only after the initial test in February did the index fall further below the moving average than where it is today. Every other instance has ended with a sharp reaction higher. Whether that happens this time remains to be seen. With investors re-evaluating their bullish views on stocks, the dollar pressing on new highs, and the action beneath the surface showing increasing vulnerability, bulls want to see more evidence of risk-seeking behavior. Seeing stocks dig in at this key level would be a great place for that to start.

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.

Stocks Or Bonds?

When the market provides us mixed signals, we dive beneath the surface to find more clues about the current environment. Here's the S&P 500 relative to U.S. Treasury Bonds, with the Russell 2000 overlaid. Note the similarity between them during the past year. When comparing stocks vs bonds it tells a story of not just where the alpha is but also how market participants are behaving. Similar to strength from small-caps, the ratio is a great gauge of risk appetite. Hence, why they look the same.

SPY/TLT tried to break out this week, but couldn’t quite get it done. As long as these charts continue to be trapped in their sideways ranges, expect more messy action for equities and risk assets in general. But, if and when we get upward resolutions, be ready for a more risk-on environment.

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.

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.

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.

Whipsaws Around The World

One of the most common characteristics of choppy markets are whipsaws. The chart below is a great example of this kind of price action, and we’re seeing it all over the place of late. Many risk assets recently violated key levels of support, but ultimately repaired the damage and reclaimed them. This type of action continues to reiterate that while the market is bending, it’s not breaking. The list of new lows in our internal breadth metrics remains muted, and critical indices and commodities, such as Energy, continue to hold their heads above important levels.

There’s an old adage that “from failed moves come fast moves in the opposite direction." Is this what could spark the next leg higher for the market? Time will certainly tell, but it’s leaning in that direction, at least in the near term.

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.

Key Levels Stay In Play

With more deterioration and choppy action taking place recently, bears are looking at yet another chance to take control. Many critical areas are near the lower end of their respective ranges and once again on breakdown watch.

The rationale is very simple. If bears can’t get it done with all these areas looking increasingly vulnerable right now, it will further enforce the lack of power we’ve seen from sellers in this environment.

If buyers can step in and defend these critical levels in small-caps, regional banks, and copper miners once again, it’s hard to imagine the world is coming to an end. In fact, it would prove incredibly constructive, and would be a new set of data points on the side of the bulls.

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.

Clues From Kiwis

We often look to the Australian dollar as a barometer for global growth, but we can take that analysis one step further by checking in on the arguably more cyclical currency, the New Zealand dollar. It often gives us a nice leading signal on AUD/USD. With a good portion of the New Zealand economy being driven by agriculture, tourism, and international trade, the NZD acts as a nice microcosm for the global economy.

At notable turning points in these trends, we tend to see the New Zealand dollar provide a heads up before it’s reflected in the Australian dollar. Over the last few weeks, while the AUD has been making fresh lows, the NZD has been remarkably resilient, carving out higher lows.

Will this divergence resolve with AUD soon catching higher? The action from cyclicals would certainly support that outcome.

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.

A Big Hurdle For International Equities

These are some of the most important charts in the world right now in our view. If the global stock market is going to have the juice for another real leg higher, then we need to see the rest of the world participate. US Large-Cap Growth stocks have carried the baton and pushed the S&P to new heights, while many major diversified world indexes have consolidated. In fact, many of these countries and indexes have gone absolutely nowhere since February (they look just like small-caps).

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.

Island Reversals And Interest Rates

One of the biggest things the bears have going for them right now is the fact that the 10-Year Yield is trapped beneath the critical 1.40% level. As long as that remains the case, the trend is lower for rates, and higher for US Treasuries. But we want to stay keenly aware of any signs of a trend reversal as we continue to see a barrage of mixed signals when it comes to risk appetite around the globe.