From the desk of Steve Strazza @Sstrazza

Intermarket analysis is always an area of focus over here at All Star Charts. Right now, there are a lot of changes taking hold beneath the surface in some key cross-asset relationships.

For the longest time, the alpha has been in the US... it's been in large-caps... and it's been in growth stocks. That's been the playbook. We know because we've been running it back for years now.

Although, we're seeing strong evidence that this is no longer the case...

One of the best things about our approach is that it allows us to be incredibly flexible and adjust our views as new data becomes available.

We pride ourselves on never being dogmatic. Speaking of which, despite how much we've leaned on secular leadership from growth and tech stocks in recent years, the data is suggesting we reposition ourselves in favor of Value (read more about it, here).

Today, we'll zoom out and...

From the desk of Steve Strazza @Sstrazza

We’ve been vocal about the strong internals supporting the rally in US Equities.

We've pounded the table about one historic breadth reading after the next as they’ve continued to pop up in a variety of the major indexes and sectors since early last summer.

This seemingly constant influx of extreme readings is not something we see very often... if ever.

For example, the NYSE and Nasdaq recently registered the most new highs in history on a combined basis.

The bottom line is breadth has been overwhelmingly bullish and is one of the main reasons we're in the camp that this is likely the early innings of a new cyclical bull market.

Whenever I want to talk about bonds, I always know just who to call. Larry McDonald is a former bond trader at Lehman Brothers and author of the book, Colossal Failure of Common Sense. I highly encourage you to give it a read, especially if you're looking for some perspective on what really happened back in 2007-2008.

It's no coincidence that I reached out to him to come on the podcast. Larry and I had a very timely conversation in February of last year. So with the bond market recently losing 5-6 Trillion dollars in such a short period of time, who better to talk to than by favorite bond trader.

This was fun. We talked about the current move in rates and how that's impacting stocks and bond markets around the world. If you're looking for color on Credit Spreads and Yield curves, this is the episode for you.

What's better than a good conversation about bonds? 

Here are the 3 most defensive assets I can think of, where money flows the fastest when it's scared and looking for a safe home.

It's hard to make the argument that a flight to safety is what's happening if they're all making new lows right? 

Some of us are old enough to remember a time when Value stocks were the place to be. The kids these days look at me like I'm nuts when I talk to them about banks and energy stocks!

There's a whole world of companies that used to do great. In fact, early in my career these were the names to be in: BTU, WLT, LEH, MER, BSC..... Good times!

Tech and all that other stuff came much later and has been the big driver in the U.S. over the past decade. But the rest of the world has suffered, without that exposure to Tech and Growth, and instead loaded with banks and natural resources, the worse places on earth for some time now.

Fast forward to today and we continue to get more and more evidence suggesting that it's changing.

It's no longer US over International and EM. It's been EM and International over US. It used to be Growth over value for so long.

That's just no longer the case:

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying stocks as they climb the market-cap ladder from small, to mid, to large, and ultimately to mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B) they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market as that is typically where these potential 50-baggers come from.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… all would have been on this list at some point during their journey to becoming the market behemoths they are today.

When you look at the stocks in our table you...

These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.

This month’s Video Conference Call will be held on Monday March 1st @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.

Here are the details for Monday evening:

I've been incredibly fortunate to travel and learn from other cultures over the years. The tools and strategies I've picked up during my experiences in Singapore, Hong Kong, London, Tokyo, Taipei, Dublin and many other cities around the world have really helped shape the way I approach markets.

After so many conversations with smart folks, from all kinds of different backgrounds, for so many years, it makes it almost impossible not to learn a few tricks along the way.

Today I want to share on of my favorite gauges of risk appetite:

This is the one we want to watch, more specifically the NIFTY Smallcap 100 Index relative to the NIFTY 50 index. The latter represents 50 of the largest Indian companies on the National Stock Exchange.

It's the ratio between the two that we want to focus on:

Our album is #1!

Oh wait, not that kind of platinum. We're talking about the metal. The guys on the ASC team are starting to get pretty geeked out about the metals space --- with good reason. Prices. Are. Breaking. Out. Sometimes it's just this simple.

From the desk of Steve Strazza @sstrazza

Check out our latest Mystery Chart!

What we do here is take a chart that's captured our attention and remove the x/y-axes as well as any other other labels that'd help identify it. This chart can be any security of any asset of any timeframe - on absolute or relative basis.

Maybe it's a ratio, a custom index, or maybe price is inverted. It could be all three!

The point is, when we aren't able to recognize what's in front of us, we put aside any biases we may have and scrutinize it objectively.

While you can try to guess the chart, the point is to make a decision...

So let us know what it is… Buy, Sell, or Do Nothing?

From the desk of Willie Delwiche.

Key takeaway: Optimism remains elevated when looking at investor positioning (equity ETFs have seen a quarter trillion dollars of inflows since the end of Q3) and demand for call options (up 60%+ over the past year). But sentiment concerns become more acute (and stocks more vulnerable) when optimism shows evidence of meaningfully unwinding. This week’s featured sentiment chart (ratio between HYG and LQD) suggests that rather than pushing back from the buffet and beginning to tighten their belts, investors continue to have a robust risk appetite. That doesn’t preclude an uptick in market volatility, but it reduces the risk of sustained weakness at this point.

Sentiment Chart of the Week: HYG/LQD Ratio and S&P 500

Stretched optimism becomes more problematic once risk appetites reverse & the HYG/LQD ratio suggests this is not yet the case. In fact, this ratio is more consistent with the healthy commencement of a new uptrend.

It's not about a virus or any economic reports. It's about Credit.

We've said it before and we'll say it again.

Look at last year, for example. By the time the S&P500 finally put in its high in February, everything else had already been falling apart. Small-caps, Mid-caps, Micro-caps, Financials, Transportation, Emerging Markets, New Highs list, Advance-Decline Line, the Value Line Index and S&Ps relative to its alternatives had all been pointing to stocks falling.

There was more data early last year suggesting to be completely out of stocks, and in bonds instead, than before any other crash in stock market history. We discussed this last week.

But even if you ignored all of those factors. And you just looked credit, you would have seen Treasuries significantly outperforming the rest of the bond market. Credit told you: