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[PLUS] Weekly Observations & One Chart for the Weekend

August 12, 2022
JC Parets

From the desk of Willie Delwiche.

While many started to pay attention to the potential for equity market weakness well after the S&P 500 peaked back in January, a look beneath the surface showed that trouble had been brewing for a while. The percentage of stocks in the S&P indexes that were 20% or more below their highs stopped retreating in March of 2021 and started to rise over the second half of 2021. That intensified over the first half of 2022 and crescendoed to a peak in mid-June (at which point between 75% and 85% of stocks were in drawdowns of 20% or more). The pattern of higher highs and higher lows in this measure of stock market weakness is now being challenged. Already fewer stocks in the mid-cap S&P 400 are in 20% drawdowns than was the case in early June. Small-caps and large-caps aren’t far behind. Before sustained strength, we usually experience waning weakness. And that is what we are seeing right now.  

Breadth Thrusts & Bread Crusts: Letting Profits (Cantaloupes) Run

August 11, 2022
JC Parets

From the desk of Willie Delwiche.

I don’t want to count my melons before they are ripe, but letting profits run in the garden looks like it’s going to pay off this year. 

Sorry for the mixed metaphors. This is what I’m talking about… 

I spotted a volunteer melon plant coming up next to the garage earlier this summer. In gardenspeak, a “volunteer” is something that comes up on its own, not because of a seed that was intentionally planted. It’s not in the best spot and I could have pulled it out right away. 

But I didn’t. I let it grow for a little while. Then a little while longer. Now I have an awkwardly-situated cantaloupe plant that covers 30 square feet. 

So why did I leave it?  

[PLUS] Weekly Sentiment Report

August 10, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: The bulls are raising their voices in excitement. For the first time this year, momentum and breadth are improving in tandem. Despite the bullish developments in recent weeks, the structural trend remains lower. This newfound optimism builds upon months of selling pressure replaced by broadening pockets of near-term strength. Now that the ball is in the bull's court, they have to do something with it. This means proving they have what it takes to stay in the game, and that we’re experiencing strength beyond an oversold bounce.

Sentiment Report Chart of the Week: Investors Finding A New Dance Partner?

[PLUS] Dynamic Portfolio Management

August 9, 2022
JC Parets

From the desk of Willie Delwiche.

We adjusted our international equity exposure to stay in harmony with global leadership and are putting some money to work domestically following the late-July breadth thrust.

[PLUS] Weekly Market Notes

August 8, 2022
JC Parets
From the desk of Willie Delwiche.

Key Takeaway:

  • Sustained market strength tends to be quiet.
  • Noisy price swings can obscure underlying downtrends.
  • Bulls holding serve on rally but hardly pressing an advantage.

The price moves in this environment have been impressive in both directions. One-quarter of the stocks in the NASDAQ are more than 50% above their 52-week lows, but more than 40% are still 50% or more below their 52-week highs.

Last week, for the first time since early April, more stocks on the NASDAQ made new highs than new lows. That ended the consecutive streak of days with new lows > new highs at 83. This was more than two weeks longer than the previous record stretch (which ended in December 2008 - prior to financial crisis lows). Like many of the stocks that make up the index, the NASDAQ Composite is well off its lows. But it is still more than 12% below where it was the last time new highs exceeded new lows.

[PLUS] Weekly Market Perspectives - Burden Of Proof Is On The Bulls

August 3, 2022
JC Parets

From the desk of Willie Delwiche.

We are still waiting for evidence that the bear market in equities has run its course, and a new bull market is being reborn. We have seen the short-term risk environment improve slightly over the last few weeks (2/5 criteria triggered), and the overall environment is beginning to lean more toward opportunity than risk. However, the burden of proof is on the bulls to show evidence of a sustainable move higher.

Breadth Thrusts & Bread Crusts: Overlooked Cucumbers & Missed Opportunities

July 28, 2022
JC Parets

From the desk of Willie Delwiche.

It's not the first thing I do in the morning (a cup of coffee and some devotional time take precedence) but early each day, I am out in the garden. Hose in hand, I water what needs to be watered. I'm also observing – noticing weeds, identifying what needs to be propped up or redirected, and making a mental note of what is ripe and ready to be picked.

Right now, it's cucumbers – a lot of them. I'm giving them away as fast as I can. But I still had to pickle a bunch this past weekend (Capital Preservation in investing parlance). They are almost hydra-like this time of year. Eat one and there are three more ready to be picked.