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.

Energy Futures Turn On The Heat

Crude Oil broke above resistance at its 2019 highs back in June and has been grinding higher ever since despite its energy-related peers remaining beneath their corresponding resistance levels. That changed this week as Heating Oil and Gasoline finally broke out to new multi-year highs. The recent strength from this group comes as base metals continue to correct through time and price. This kind of rotation within the commodities complex is constructive, especially after such a strong run-up off last year’s lows. We think Energy is offering some excellent risk/reward opportunities right now as we’re not only seeing other commodities contracts confirm the price action in Crude, but Energy stocks are also breaking out to new highs (see Chart #5). 

From the desk of Willie Delwiche.

The weight of the evidence is neutral and we’ve been discussing how it has been and remains a messy environment for stocks. We can see this in our Risk On/Risk Off Ratio which has been consolidating for several months. What caught our attention recently is how closely this ratio has moved with Emerging Markets. When looking for evidence of whether the market is poised to break out (which some indexes suggest it is), break down (which some breadth divergences suggest is a possibility), or continue to move frustratingly sideways (which seems to be a minority view at this point), we would start with this chart. If the Risk On/Risk Off Ratio and Emerging Markets are making new highs, the cyclical is probably ready to resume. If they are moving lower, a deeper correction for stocks could be in store. While they continue to move sideways, it probably remains a “less is more” kind of market.

This is the video recording of the June 24th Town Hall Meeting w/ Willie Delwiche & JC Parets

06/24/21 2PM ET

From the desk of Willie Delwiche.

Key Takeaways:

• Investors are optimistic, but momentum isn’t confirming price strength
• While indexes rally, breadth trends are stumbling
• Big rebound in earnings is already priced in

The NASDAQ Composite rallied to a new all-time high this week. The S&P 500 fell just shy of a record close of its own. While sentiment indicators suggest that investors are celebrating these new highs, a closer look shows that index-level price strength is not being confirmed by momentum. In fact just the opposite is happening, with weekly momentum trends continuing to move lower.

The Value Line Geometric Index has moved from new high to below its 10-week average in the space of a week. Momentum has peaked and is moving lower.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

• Last week’s volatility produced a shake-up in our relative strength rankings. Materials and Financials both saw big drops, while Technology and Communication Services surged into the lead.
• Looking beyond the cap-weighted S&P 500 sectors shows a less decisive shift in leadership - Energy & Real Estate remain strong, both at the sector level and in terms of the industry group heat map.

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.

Using Caterpillar And Copper As A Risk Barometer

On the topic of high-beta names, here’s a behemoth from the Industrial sector. We think of Caterpillar as an index in and of itself - a barometer for global economic growth, reflation, cyclicality, etc. It’s all reflected in CATs stock price, as it is highly correlated with risk assets such as Copper and Emerging Markets. The stock recently made its first lower low in over a year, suggesting we continue to approach these offensive areas with caution. We’ll be watching to see if Copper, and others... even risk-on forex pairs like the Aussie/Yen, will continue to follow Caterpillar’s path. How much structural damage is endured before we get a tradeable bottom in these assets will provide us valuable insight regarding the future market environment for risk-taking.

From the desk of Willie Delwiche.

This is the video recording of the June 17th Town Hall Meeting w/ Willie Delwiche

06/17/21 2PM ET