From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

In Focus for June: We are still waiting for the evidence that the bear market in equities has run its course and a new bull market is being reborn. While the short-term risk environment has improved slightly over the last week or so, the overall environment tilts more toward risk than opportunity and our longer-term risk indicator is still in risk off territory.

Enduring a downtrend is not a prerequisite for participating in the ensuing uptrend. We will practice patience in the batter’s box until the market delivers fatter pitches on a more consistent basis.

Key Takeaway:

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.

The Impact of a Higher Dollar

We’ve talked a lot about the implications of a higher dollar. Long story short, it means lower prices for risk assets. This includes US stocks, commodities, and especially international stocks. They should all enjoy a tailwind if the dollar is to fail and roll over at these former highs.  

Overlaying growth stocks such as the ARK Innovation ETF with the Dollar Index gives us a nice visual of this relationship. Look at the large base in DXY that has formed since its 2020 peak. If we were to invert that DXY chart it would fit seamlessly with the distribution pattern in ARKK, shown below. The two have a very strong negative correlation. 

From the desk of Steve Strazza @Sstrazza

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 big picture context 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.

Macro Universe:

From the desk of Willie Delwiche.

That this is an unfamiliar and uncomfortable environment for many investors goes without saying. It was unforeseen to the extent that it is at odds with recent experience. For passive investors, the past decade (even through COVID) was one of only mild (in terms of degree and duration) interruptions to the underlying upward trend in their portfolios. Through this period, some things that should not have been forgotten were lost. Among these were diversification principles across and within asset classes. Commodity exposure withered to nothing and US investors were rewarded for indulging their home country bias. With the trend in the 60/40 benchmark portfolio now in its most significant downturn since the financial crisis of 2008/09, investor nerves are frayed, the mood is sour and patience is being tested. Adding to this frustration may be the reality that if one was indeed paying attention to expiring breadth thrust regimes, collapsing new high lists and expanding new low lists, some of this year’s roller coaster ride could perhaps have been avoided. 

From the desk of Willie Delwiche.

Key Takeaway: Risks to the economy are rising, though a recession is not a foregone conclusion at this point. Barring a dramatic and unlikely abatement in inflation pressures, the path of least resistance for interest rates is higher than the market is accounting for at this point. Rally attempts have been volatile but, so far at least, short-lived and as longer-term trends turn lower, many investors are dealing with an unfamiliar (and uncomfortable) environment. While moods have soured, positions are little changed. Overall these are the conditions under which bear markets can die and bull markets be re-born. The evidence at this point does not suggest that turn is at hand.  

This is the video recording of the June 2nd Weekly Town Hall w/ Willie Delwiche.

06/02/22 2:00 PM ET

From the desk of Willie Delwiche.

Key Takeaway:

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.

Major Levels

The Dollar Index and rates are the two most important charts on the planet right now, and they’re both rolling over. If these two critical areas of the market catch lower, it should provide a much-needed boost to a stock market still grappling with selling pressure. A weaker dollar lifts all risk assets, while lower rates should impact the most beaten down areas, primarily tech. If these tops resolve lower and stocks don’t catch a bid, it raises an important question: What will it take for stocks to rally?

From the desk of Steve Strazza @Sstrazza

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 big picture context 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.

Macro Universe:

From the desk of Willie Delwiche.

In a year marked by broad weakness in both stocks and bonds, commodity strength has provided some portfolio ballast for those who have been willing and able to expand their asset allocation opportunity set. After several weeks of consolidation, the CRB commodity index is again making new highs. But rally participation looks to be narrowing. Only 12% of the commodities in our ASC Commodities universe have made new 52-week highs in the past two weeks. This was as high as 50% earlier this year. Perhaps not surprisingly, our equal-weight commodity index has not confirmed the strength in the CRB index (which has heavy tilting toward energy-related commodities). I think Bob Farrell’s Rule 7 applies here: “Markets are strongest when they are broad and weakest when they narrow.” Strength in the CRB index is more likely to persist if it’s not just energy fueling the advance.