From the desk of Willie Delwiche.

While what’s happening beneath the surface in US markets is a bit frustrating, we are seeing evidence of improving breadth on a global basis. Just shy of 75% of ACWI markets are trading above their 50-day averages, the highest level in more than two months. For comparison, 63% of S&P 500 stocks are above their 50-day averages. Broad global strength is important for the S&P 500 (especially given the current lack of a breadth-thrust backdrop) and could be critical if global equities are going to move into a leadership position as we move toward the end of 2021.

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

For the better part of 2021, we've been pounding the table about markets being a chop fest. And we'd seen little evidence suggesting this was likely to change any time soon--until this week, that is.

Trendless… range-bound… call it whatever you want, but the path of least resistance for stocks and many other risk assets has simply been sideways!  

Alas, we’re seeing some strong bullish action this week that we simply can’t ignore. Let's talk about it.

Before we get there, though, let’s take a step back and look at small- and micro-caps, as they provide great illustrations of this sloppy stock market story...

SMIDs and micros have not been able to make any real progress for most of the year. 

Pretty much everything outside of the large-cap averages have been chopping around in a range since Q1. This had reinforced our view that these messy conditions were likely to persist for the foreseeable future. But there's something brewing...

In the early days of Crypto, we were taught to believe these were currencies.

And in the case of Bitcoin, maybe it is. But when you go down the cap scale, these things are no different than stocks.

For me they're "Tech" stocks. For Howard they're "Software" stocks.

Either way, we agree that these are just more stocks we can trade. And if you choose not to, well then you're leaving a lot of alpha on the table.

Why would you purposely choose to ignore this particular group of names?

Howard and I discussed all of this during a livestream this week.

Enjoy!

This is the video recording of our August 27, 2021, All Star Charts Crypto Weekly Strategy Session.

 

The ASC team published an Under the Hood report last week in which there were a bunch of interesting opportunities to choose from. But I held my fire -- until now.

After letting these ideas marinate a bit, I've been liking the pullback and solid support holding in one of the names. 

Let's get right to it.

The FMCG sector had hit the snooze button and was in a nice slumber until recently. With the index making a new all-time high and stocks moving up above their resistances, this is a good time to take a look at FMCG.

We've been absolutely clear from the beginning that in a messy market environment, one has to be careful with regards to their investments.

What we also know, is that FMCG is a defensive sector and tends to lead the market when the sentiment isn't in the most positive territory.

So let's take a look at the stocks which are making the cut in the current market scenario.

How about being clear about our levels in the sector first?

Here's the sector chart that we're tracking at the moment. On the weekly timeframe, we're observing an overhead target above 39,600. This is the 161.8% Fibonacci extension of the October 2018 highs to December 2020 lows move.

What's left to see is if this trend continues along - above its immediate resistance - with the strong momentum that we're witnessing at present.

Click on the chart to zoom in.

...

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

As the rally in US Treasuries fizzles, we have to ask ourselves...

Where’s the alpha in the credit market?

It’s an important question, especially for those of us who maintain exposure to bonds. 

And for those of us who don’t, it’s always good to know what’s going on in the fixed income space, as it’s often very valuable information.

Frankly, as investors, it’s irresponsible and negligent to not know what’s going on in this asset class.

It’s the largest market in the world!

And right now we’re seeing evidence of a shift in leadership toward High Yield Bonds $HYG.

We know it’s in our best interest to pay attention to this development so let’s look at a couple charts that suggest bond investors are reaching further out on the risk curve for a higher yield.

First up is high yield bonds relative to their safer alternative, US Treasuries: ...

This is the video recording of the August 26 Town Hall Meeting w/ Willie Delwiche

08/26/21 2PM ET

 

From the desk of Steve Strazza @sstrazza and Grant Hawkridge @granthawkridge 

Whether more stocks are going up or down these days simply depends on where you look. Some advance-decline lines are moving higher, but others are moving lower.

Weakness and divergences in these indicators are more often than not resolved over time, but the longer they persist the more concerning they become.

This hasn’t been an issue for most of the major averages, as the S&P 500 and other large-cap indexes keep making new highs with confirmation from their A/D lines. 

Yet when we look beneath the surface, and particularly down the cap scale, we're seeing a different story. Ultimately, some stocks are going up, but most are not.

You’ve probably heard already, but the current environment is an absolute mess as the weight of the evidence continues to hang in the balance. In today’s post, we’ll discuss some charts that do a great job illustrating all the mixed signals out there right now. 

Advance-decline lines represent the net amount of stocks within an index that increase in price each day, on a cumulative basis. It’s simple...

In recent weeks, we've been discussing the potential upside in the altcoins if Bitcoin gets back into the 60,000's.

We're talking doubles and triples, at least...

There's no doubting that we've held a more bullish view when Bitcoin was hovering in the 30,000's, and more recently when Bitcoin resolved higher into the 40,000's.

But as always, we need to remain objective in our approach and look for cracks in our thesis.

It's one of many reasons why we always play devil's advocate; that is, collating a list of data points that go against our thesis and would subsequently make us change our perspective.

Let's not forget, flipping our approach as new evidence comes in is not only an advantage, but in public markets, it's a necessity.

So with that said, what if this isn't as clean a breakout as we initially intended?

What then?