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[PLUS] Weekly Sentiment Report

July 27, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaway: In recent weeks, the bulls have made their presence known after hiding in the shadows for most of the year. But as they inch their way forward, they will need assurance from the market that they’re moving in the right direction. So far, any signs of positive feedback have been lacking. New lows remain greater than new highs (for 35 weeks and counting). And there is an absence of strength among global markets, although they have stopped going down. The market needs to turn it up in regards to price and participation if the bulls are to prove more than a bunch of wallflowers.

Sentiment Report Chart of the Week: How Do We Keep The Bulls On Dance Floor?

[PLUS] Weekly Market Perspectives - Risk Indicators Remain On Defense

July 26, 2022
JC Parets

From the desk of Willie Delwiche.

It’s been over a month since the S&P 500 made a new year-to-date low and market volatility has cooled somewhat. After averaging a 1% move (in either direction) every other day in the first half of the year, the S&P 500 has only had 5 such moves so far in July (16 trading days). The last one was over a week ago.

A couple 9-to-1 up volume days on the NYSE and an uptick in bulls on the sentiment surveys is providing some hope that the bear market environment may be fading. Our Risk Indicators (as well as the continued presence of more stocks making new lows than new highs) argue that it is premature to jump to that conclusion. 

[PLUS] Weekly Market Notes

July 25, 2022
JC Parets
From the desk of Willie Delwiche.

Key Takeaway:

  • Fed in spotlight as Powell & Co move rates to last cycle’s peak.
  • A dovish pivot when financial stress has never been lower seems unlikely.
  • Persistent bear market leaves bulls needing to prove their case.

While high relative to the previous decade, the Fed could in 2019 at least make the argument that inflation and wage growth were low from a historical perspective. Additionally there was evidence that financial stresses were starting to build. Now, the wage and price pressures that were still incubating in 2019 have erupted to their highest levels in decades while at the same time the financial stress has never been lower (according to the St. Louis Fed’s index).

[PLUS] Weekly Observations & One Chart for the Weekend

July 22, 2022
JC Parets

From the desk of Willie Delwiche.

Stocks have rallied off of their mid-June lows, but it goes without saying that 2022 has still been a year marked by volatility and an absence of strength. In fact it has been historic (or nearly so) on both accounts. In terms of volatility, only two years (2008 and 2002) finished with a higher percentage of days on which the S&P 500 closed up or down by 1% or more than we have seen so far in 2022 (just shy of 50%). No year has come close to as low a percentage of days with more new highs than new lows. So far we have had seven in 2022: two in January, three in March and one each in April and May. That is just 5% of the trading days so far this year. The next closest year was 2008, which had new highs > new lows on just 13% of the days. At the opposite extreme is 2017, regarded by many as one of the best years in stock market history. That year, 90% of the days saw more stocks making new highs than new lows, only 3% of the days had the S&P 500 moving by more than 1%, and the S&P 500 booked a nearly 20% gain.

Breadth Thrusts & Bread Crusts: The World Is An Uncertain Place

July 21, 2022
JC Parets

From the desk of Willie Delwiche.

The world is an uncertain place. 

But that doesn’t make it altogether random. Trends persist – right up until the point that they don’t. If we’re going to move beyond irrefutable narratives and successfully navigate reality, we need to develop feedback mechanisms that can keep us on the right path (and get us back on the path when we stumble into the weeds). 

Operating in the world as it is and not as we would like it to be requires an ability to test viewpoints, an awareness that sometimes the ground shifts beneath our feet and a willingness to consider scenarios from both directions.  

[PLUS] Weekly Sentiment Report

July 20, 2022
JC Parets

From the desk of Willie Delwiche.

Key Takeaway:  It’s been bears on parade all year, starting with significantly less optimism coming into this year than was seen at the beginning of 2021 or 2020 and continuing through lengthy stretches of more bears than bulls on both the II and AAII surveys. Persistent pessimism among advisory services has now been broken and it’s time for the bulls to show what they’ve got left in their tank. The clock is ticking, though, as they’ve used so much of their limited firepower and yet we continue to see more stocks making new 52-week lows than 52-week highs. Bulls have put together two days of better than nine-to-one upside volume (on July 15 and again on July 19). That checks off one box (out of five) on our bull market re-birth checklist, but there is more work to be done before concluding that any uptick in optimism is well-placed. 

Sentiment Report Chart of the Week: Recession Fears Misplaced?

[PLUS] Weekly Macro Perspectives - Economy Still Reckoning With Pre-COVID Imbalances

July 19, 2022
JC Parets

From the desk of Willie Delwiche.

The current imbalance between job openings and unemployed persons gets plenty of attention. That there are twice as many job openings as there are people looking for a job is a historically unique situation. Having more job openings than job searchers, however, is not unprecedented. That was also the situation in 2018 and 2019, though the emergence of COVID seems to have washed that from our collective awareness. I can still clearly recall discussing skilled worker shortages with small business owners in the Midwest. The policy responses (both fiscal and monetary) to COVID exacerbated these imbalances, but the seeds of the current wage and price pressures were being sown before lockdowns and social distancing became a reality. 

[PLUS] Weekly Top 10 Report

July 18, 2022
JC Parets

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.

ETH Kicks Off Crypto Rally

It was a busy weekend for cryptocurrencies, and Ethereum, in particular. The world’s second-largest crypto just resolved higher from a bearish continuation pattern right at a key polarity zone. 

When patterns fail, it’s always great information. In this case, a downside resolution in the direction of the underlying trend was the higher probability outcome, but it didn't happen that way. Instead, buyers took control and forced an upside resolution. Another thing that makes this price action stand out is where it took place. Ethereum just dug in and reversed after a brief shakeout beneath the 2017 highs. As long as we're back above the prior-cycle peak of 1400, the bias is higher.

[PLUS] Weekly Market Notes

July 18, 2022
JC Parets
From the desk of Willie Delwiche.

Key Takeaway:

  • Stocks celebrating small wins.
  • For evidence to improve we need to see sustained strength.
  • Fed confronted with deteriorating economy while still waging inflation fight.

When new lows have exceeded new highs for 34 weeks (and counting) and the Value Line Geometric Index (a proxy for the median US stock) is no higher now than it was five years ago, even small amounts of good news get celebrated. We saw some of that on Friday.

[PLUS] Weekly Observations & One Chart for the Weekend

July 15, 2022
JC Parets

From the desk of Willie Delwiche.

The S&P 500 index is 20% off its early 2022 high, but remains nearly 14% above its pre-COVID peak. The median stock in the index, however, is now trading just below its pre-COVID high. The last several years have been an experience of tremendous volatility with no upside progress for the median stock. The numbers are even more startling among mid-caps and small-caps. Both the mid-cap S&P 400 and small-cap S&P 600 are nearly 10% above their pre-COVID peaks, but the median mid-cap stock is 10% below its pre-COVID high and the median small-cap stock is 20% below its pre-COVID high. This brings us to commodities. The median commodity is 30% below its high, but remains 20% above its pre-COVID peak. Whether it’s stocks or commodities (or bonds for that matter) there is plenty of volatility in the current environment. The volatility in commodities is in the context of an underlying up-trend. With the median stock in the S&P 500 returning to its pre-COVID high (and the Value Line Geometric Index where it was in 2018), it’s been an unrewarding roller coaster ride for stocks.