From the desk of Steve Strazza @Sstrazza

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.

Stocks Or Bonds?

When the market provides us mixed signals, we dive beneath the surface to find more clues about the current environment. Here's the S&P 500 relative to U.S. Treasury Bonds, with the Russell 2000 overlaid. Note the similarity between them during the past year. When comparing stocks vs bonds it tells a story of not just where the alpha is but also how market participants are behaving. Similar to strength from small-caps, the ratio is a great gauge of risk appetite. Hence, why they look the same.

SPY/TLT tried to break out this week, but couldn’t quite get it done. As long as these charts continue to be trapped in their sideways ranges, expect more messy action for equities and risk assets in general. But, if and when we get upward resolutions, be ready for a more risk-on environment.

From the desk of Willie Delwiche.

Despite government officials trying to explain it away, inflation is running at its highest levels in years or (in the case of producer prices) decades. For now, however, the bond market shows little evidence of concern. After pulling back from 1.75% to 1.15%, the yield on the 10-year T-Note has risen in recent weeks but remains below 1.40%. It has bumped up against that level but has not been able to get through it. German yields have moved higher recently and seem to be giving US yields a green light to break out. Resiliency from Financials even as yields were retreating in Q2 and Q3 also argue for an upside resolution here. The high P/E, speculative growth sectors of the market ran out of steam when yields moved higher earlier this year and they could be vulnerable again if yields make a sustained move to the upside from here.

This is the video recording of the September 9th Town Hall Meeting w/ Willie Delwiche & JC Parets.

09/09/21 2PM ET

From the desk of Willie Delwiche.

Labor Day weekend in Wisconsin usually means one last summer trip up north for one last summer swim in the lake.

For me, this also meant the final jump off the giant raft we built (a ton of steel sitting on 12 barrels, with multiple jumping platforms and a slide that ends six feet above the water). Then, it was time to bring it back to shore to disassemble it for winter storage.  

Driving south toward Milwaukee at the end of the long weekend, I saw all sorts of summer toys being towed home for the winter. While it was not quite as warm as in August and the sunset came a bit sooner than it did in July, it was still a lovely evening and a chance to look back and also look ahead.

From the desk of Willie Delwiche.

• The Real Estate and Health Care sectors are relative strength leaders up and down capitalization levels. The Consumer Staples sector is a relative laggard across the cap scales.
• Health Care strength can be seen on the industry group heat map with positive readings for the Pharma, Biotech & Life Sciences group. While the Consumer Staples sector is weak overall, the large & mid-cap Food & Staples Retailing groups are improving.

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 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

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.

It’s Bear Hunting Season

In our monthly candlestick review, the primary theme was the long list of all-time highs. That’s never bearish. But when we looked toward the weaker areas, despite lagging behind, they’re all holding critical levels of support. When the bears can’t drag down even the worst areas, that’s information. Precious metals, energy, or in this case, airlines whipsawed below support, only for bulls to come out and reclaim control.

As illustrated here, we got about as strong of follow-through as the bulls could have wished for. Again, the fact that so many of the weakest areas just won’t break down is incredibly constructive. If bears can’t even take out airline stocks, how can they ever grab a hold of the broader market? You have to start somewhere, and right now they’re moving backward.

This is the video recording of the September 2nd Town Hall Meeting w/ Willie Delwiche & JC Parets

09/02/21 2PM ET

From the desk of Willie Delwiche.

According to Charles Darwin, you cannot make observations without some kind of underlying theory. And if you have any theories about financial markets, you understand thinking about what could or should happen with your investments.  

These concepts can be useful if they help us prepare for what is happening in the markets. But they can also impede or obscure reality.

We can observe and project all we want -- so long as we don't get distracted by the what could and what should that we lose sight of what is. 

I don't see this as an argument in favor of always being bullish or a warning about the risks of needing to be proven right. Instead, it's an encouragement to agnostically acknowledge and operate within the market as it is rather than as we wish it would be.

It’s about pursuing the opportunities that are before us even when they are unexpected. 

Especially when they are unexpected. 

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Median stock has gone nowhere for months
• Bond market trusting Powell more than data
• Commodity strength fueled by broad participation

As discussed in yesterday’s Market Notes, last week’s rally has us questioning whether we remain in the choppy market that has been experienced on many levels for the past few months or if we are poised for some degree of resolution to the upside. Today, we’ll take a closer look at what that could mean across stocks, bonds and commodities. As market depth evaporates ahead of the Labor Day weekend, there is no reason to believe that what we talk about has to happen this week.