From the desk of Willie Delwiche.

• Health Care made a new high last week and that helped fuel its rise in our relative strength rankings (up to the fourth spot and into the leadership group). Energy and Materials also ticked higher in the rankings, while Consumer Discretionary fell three spots.
• Despite an overall theme of large-cap strength, the industry group heat map shows deteriorating conditions across sizes for the Energy and Banks groups.

From the desk of Willie Delwiche.

• Communication Services and Real Estate swapped places near the top of our relative strength rankings for the S&P 500. While Real Estate strength persists through the equal-weight version of the rankings and down the market cap scale, Communication Services relative strength appears to be more selective.
• Our industry group heat map reflects recent strength among large-cap groups and relative weakness from the mid-cap and small-cap areas of the market.

From the desk of Willie Delwiche.

The S&P 500 fell 1.5% on Monday and rebounded with a 1.5% gain on Tuesday. These were the 31st and 32nd daily moves of 1% or more so far in 2021. At this point last year, we had experienced 72 daily swings of 1% or more, the most we had seen by July in at least two decades. While 2021 has been a drop off from last year’s torrid pace, it’s nothing compared to what was seen in 2017 (which had just 4 moves of 1% in either direction at this point, and finished the year with just 8). What is amazing about 2021 is how closely it has matched the median experience of the past 20+ years. So far this has been a year that is remarkable in its unremarkableness.

From the desk of Willie Delwiche.

It was a voicemail that any parent would dread…

Hello, this is the nurse from camp. Your son had an accident. He's fine but I need to talk to you… 

I quickly called back to get the details. I was on the road just a few minutes later, making a nighttime trip to a rural emergency room 100 miles away.  As it turns out, my son suffered a broken arm during a relatively run-of-the-mill game of chase that involved jumping across a small ditch and not quite sticking the landing. He was doing what we sent him to camp to do.    

A couple of hours alone in the car gave me plenty of time to think about all types of risks and how they are unevenly distributed across both space and time. Accidents can really happen anywhere. Still, we have nurses at summer camps, not in our living rooms. Broken arms and other more minor injuries are more likely at the former than the later. 

This is the video recording of the July 22nd Town Hall Meeting w/ Willie Delwiche & JC Parets

07/22/21 2PM ET

From the desk of Willie Delwiche.

Key Takeaways:

• Breadth downgraded to neutral as trends in the US and globally weaken
• Absence of breadth thrust regime weighs on a market struggling for direction
• Reducing equity exposure in Cyclical and Tactical Opportunity portfolios

The divergences between what has been seen in the popular averages and what is happening beneath the surface have become significant enough that we have moved breadth to neutral in our weight of the evidence framework. This leaves the scales tilted away from opportunity and toward risk. 

The most recent breadth thrust regime expired in early June and since then the percentage of global markets trading above their 50-day averages has fallen from the upper 80’s to now just 20%. One-third of the markets are not even above their 200-day averages. US industry group trends have also faltered. The percentage trading above their 10-week averages is breaking down while the percentage making new 13-week lows is breaking out.

From the desk of Willie Delwiche.

• Defensive sectors are perking up on an absolute and relative basis. Utilities, Consumer Staples and Real Estate were all positive last week (Staples even made a new high) and they occupy the top three spots in our short-term relative strength rankings. Staples and Utilities are still longer-term relative strength laggards.
• Real Estate remains the top-ranked sector (and is an industry group leader) across the size spectrum.

From the desk of Willie Delwiche.

A recurring theme when it has come to market breadth is that while it has not been keeping pace with the indexes, it has not been breaking down. That is starting to change. Net new highs have turned negative on a 21-day and 63-day basis as divergences are starting to look more like meaningful deterioration. If they turn negative on a 52-week basis (shown below) it would suggest a more significant breakdown in breadth and a building of downside risks in the indexes.

This is the video recording of the July 15th Town Hall Meeting w/ Willie Delwiche

07/15/21 2PM ET