From the desk of Steve Strazza @Sstrazza

Lots of charts are being shared showing the exponential growth in trading activity, new accounts, and anything else that might paint a story of euphoria at retail and discount brokerages since the pandemic broke out.

Here is some personal background only to provide context for what I’m about to discuss.

I live on an island. It is tiny, about 4 square miles. In fact, I live on an obscure island just above Key West which is technically much smaller than that. As a “Census Designated Place” it’s really just a collection of roads and canals, a village of about 4,400 people.

It’s nice, but it comes at the cost of an economy that relies almost entirely on Tourism. The people who live here are more or less fishermen or workers at the many hotels, bars, and restaurants in what’s generally a booming downtown area. Since shutting down our borders months ago, the local unemployment rate has spiked to an estimated 50%.

From the desk of Steve Strazza @Sstrazza

Yesterday, we wrote about the divergence in both structural and tactical trends between Dow Transports and Semiconductors. The bottom line is that Dow Transports (DJT), which is the traditional "Dow Theory" average, has been getting smoked relative to the "New Dow Theory" average, the Semiconductor Index (SOX).

While we don't know whether or not this can persist indefinitely or if these divergences will soon resolve themselves, we do know that Semiconductors remain one of the secular leaders and are thus an area we want to continue to bet on from the long side.

In this post, we'll outline some Trade Ideas in our favorite Semiconductor names.

Something all of these setups have in common is that they are exhibiting impressive relative strength vs the broader market. They also all resolved to fresh highs recently, which gives us a well-defined risk management level to trade against.

From the desk of Steve Strazza @Sstrazza

JC summed up our present view on US Equities perfectly during this week's Conference Call:

"There are stocks we want to buy, and there are stocks we want to sell," he told Premium Members on Monday night.

Some areas, particularly the secular leaders coming into the selloff, continue to trend aggressively higher while others refuse to participate in any meaningful upside.

A great example of this is illustrated by contrasting the chart of the Dow Jones Transports (DJT) to what we consider the "New Dow Theory" Average, the PHLX Semiconductor Index (SOX).

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 15, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

This week's main theme is that the strong continue to get stronger and vice versa, which we'll highlight in our Industry and Sector ETF tables, below.

Notice how the top three performers this week also happen to be the only Industry ETFs that are positive over the trailing 3-month period?

Gold Miners (GDX), Biotech (IBB), and Internet (FDN) posting positive 3-month returns may not sound like much but is actually quite impressive as it means these areas have already taken out their highs from just before the broader market peaked and collapsed in February.

Click table to enlarge view.

From the desk of Steve Strazza @Sstrazza

This week's Mystery Chart was a simple yet pivotal one... it was a ratio chart of Stocks vs Treasury Bonds.

With stocks struggling at resistance this week and Treasuries meandering beneath all-time highs, both appear to be at key inflection points.

Making things even more interesting is that the S&P 500 (SPY) relative to 20+ Year Treasury Bonds (TLT) ratio is also at a key level of interest. It is make-or-break time for these two asset classes so let's dive in and see what's going on.

From the desk of Steve Strazza @Sstrazza

Breadth divergences from earlier this year took a while to confirm, but once they did we saw considerable downside.

My Chart Summit Presentation was on how I use statistics and scans to visualize market internals for insight on breadth and relative strength. I used tables from our Weekly Momentum Reports in January and February to illustrate the clear deterioration in participation taking place at the time despite the major indexes grinding to new highs.

In this post, we’ll do a similar exercise and use stats to analyze whether breadth has been improving or deteriorating in Global Equity Markets over the past month.

From the desk of Steve Strazza @Sstrazza

Last month we wrote about the lackluster move from some of the cyclical sectors off of their March lows, particularly Industrials and Financials.

We continue to see weakness out of these areas over both long and short-term timeframes as Financials are pressing on all-time lows relative to the S&P 500 and Industrials just made a fresh relative 20-year low.

In this post, we'll take a look at these underperforming areas and share some trade ideas to express our bearish thesis.

First, let's take a look at the long-term relative weakness we just mentioned.

Click chart to enlarge view.

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

From the desk of Steve Strazza @Sstrazza

For the week ended Friday, May 8, 2020:

Every weekend we publish performance tables for a variety of different asset classes and categories along with commentary on each.

Many of the relative trends in stocks that have been in place for a long time have come into question recently as they're showing signs of maturing due in part to the change in leadership we wrote about this week.

In this post, we'll highlight two structural intermarket themes that have remained robust throughout this tumultuous time for equity markets.

The first relative trend that hasn't slowed down at all is the relentless outperformance of the US over the rest of the world. Our first table shows the Wilshire 5000 (DWC) dominating every Global Index over just about every timeframe, from this week to the trailing year.

Click table to enlarge view.

With Chart Summit India now almost a month in the rearview, I finally found some time to go back and rewatch some of the presentations.

Together with our partners, we hosted 20 amazing speakers and thousands of attendees and raised a remarkable amount of money to fight the COVID-19 pandemic. It was a really great event and an honor to be a part of.

With over 10 hours of content from some of the market's top technicians, I won't be able to do them all justice in just a short blog post so I highly encourage you to go watch all the full presentations for yourself. They can be accessed for free here.

With that said I'll try and do my best. Bruni recently wrote a post about some of his main takeaways from the conference which you can read here. I'm going to build on that today and share some of the things I found valuable from the handful of presentations I recently went back and watched.

From the desk of Steve Strazza @Sstrazza

There aren't too many charts in the Equity Markets breaking out of decade-long bases on an absolute basis right now...

This week's Mystery Chart was though, and the vast majority of you were buying it against former resistance turned support. We agree with that approach and would be doing the same here.

Thanks as always to all those who participated, but there's just one catch...

The chart was inverted! This means most of you were actually selling the breakdown in the Latin America 40 ETF (ILF).

From the desk of Steve Strazza @Sstrazza

There has been a lot of talk about the potential implications on the broader market if Mega-Cap Growth and Technology stocks were to lose their leadership. Since they have been responsible for driving much of the gains in the major averages for years now... we can only ask ourselves, who might pick up the slack if and when this happens?

In this post, we're going to analyze the top-performing areas today and compare them to their strength before the market crashed in February and March.

We'll also look at the leaders from back then and see how they're holding up today.

This will give us an idea of whether we really are undergoing a change in leadership or not, and if so, where the new areas of strength are.