From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Rotation is the lifeblood of any bull market.
If a sustained uptrend is going to persist, then we need to have broadening participation... or at least some healthy rotation.
And that’s exactly what we're seeing within commodities right now.
As the energy group chops sideways and base metals hang tough, we’re starting to see signs of strength from one of the worst-performing areas over the past year.
Softs.
Like livestock last week, it appears this group of commodities are ready to play catch-up as they turn the corner and head higher.
Considering the fact that other groups are simply consolidating or correcting through time instead of price, we'd argue that this looks more like an expansion in participation rather than rotation. But it's really just semantics. It's all bullish at the end of the day. Let's dive in.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
In today's post, we’ll discuss some of our favorite and most important intermarket ratios and see what they’re suggesting for markets and risk appetite around the globe.
One thing we found interesting when digging through these charts is that many of them look a lot like stocks do right now.
Sideways. Range-bound. Messy. But, within the context of underlying uptrends.
So these are basically just continuation patterns on shorter timeframes.
But, after consolidating for months and even quarters now, we are beginning to see some resolve higher… kind of like we’re seeing from stocks on an absolute basis.
Coincidence? Probably not.
We think this makes a lot of sense and bodes well for risk assets. Let’s take a look at some of these charts now.
Here’s one of the most important cross-asset ratios we track, and it’s a great example of exactly what we’re talking about.
Financials have made quite the comeback in recent weeks, with the Large-Cap Financial SPDR $XLF trading back to record highs as bank stocks around the world have fought to repair some of the damage endured during Q2.
We even saw regional banks break back above a major level of interest last week. The importance of this can't be overstated.
But that's just the US. What are financials doing in the rest of the world? Are they confirming this strength we're seeing from the US?
In this post, we’ll provide an in-depth rundown of what’s going on with this critically important sector--not just in the US, but around the globe.
Let’s kick things off with last week’s mystery chart. As always, thanks to everyone who participated.
We asked whether the recent highs were a false start or a failed breakout. The answers were skewed in favor of the bulls, as most of you said it was merely a retest of the previous highs. And it looks like you were right!
Here it is... the S&P Global Financials Index $IXG:
Welcome to our latest RPP Report, where we publish return tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The US Dollar Index $DXY has been a good reminder that price doesn’t always move in a straight line.
Paul Tudor Jones has been quoted saying “markets only trend about 15% of the time.” The textbooks will tell you it’s somewhere between 20% and 30%. But it all comes down to how you’re measuring it.
We think it’s fair to say most markets trend about 25% of the time on a structural basis.
And the present year two market conditions have been a great illustration of what they look like the other 75% of the time… range-bound... sideways... a hot mess.
Speaking of which, last week, we pointed out that Dollar strength had stalled and that things were beginning to look messy on shorter time frames.
This is one of our favorite bottom-up scans: Follow The Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients. Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty penny.
Welcome back to our latest "Under The Hood" column where we'll cover all the action for the week ended August 6, 2021. This report is published bi-weekly and rotated on-and-off with our "Minor Leaguers" column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
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).
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the context of the big picture and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
As investors, we have plenty of options.
We can express a bullish or bearish thesis in a variety of different asset classes - from stocks and commodities to bonds and even forex or crypto markets.
But in making the decision of which one of these areas to focus our attention, we must ask ourselves a critical question every now and then...
Where is the best place to allocate our capital?
Money flows to where it is treated best. And that’s always where we want our focus to be.
Remember, we’re here to make money, not fulfill our intellectual curiosities or express our values.
Lucky for us, determining where the alpha is as simple as performing a little intermarket analysis.
So let’s dive in and do just that.
Earlier this year, when the SPY/TLT ratio hit a key extension level, we knew we were at a logical place for stocks to take a break and bonds to get a shot at taking leadership.
Dividend aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for 5-9 years.
We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money”. Imagine if years of consistent dividend growth and high momentum & relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.