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All Star Charts

Expert technical analysis of financial markets by JC Parets

Breadth Thrusts & Bread Crusts: Cusp of Change

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From the desk of Willie Delwiche.

A box of family photos showed up at my house this weekend. 

Some are relatively recent, others stretch back nearly a century. Together, they tell a story of generation after generation experiencing life in its many stages. Each one captures a moment

One that really stuck out to me was an image of a camping trip from more than 90 years ago. You can see an old car with a canvas tent pitched against it. At a picnic table, we see a lady and two young boys. The younger of these two is my grandfather. Next to him is his brother. Behind him is their mother (my great-grandmother).

“Now that’s camping done right,” I thought as I inspected the picture.

[Read more…]

How To Make Money In A Mixed Market

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From the desk of Steve Strazza @sstrazza

First of all, thanks to everyone as always for participating in this week’s Mystery Chart.

As noted in the Mystery post last week, the rounding bottom in question is a pattern we’ve become all too familiar with since last year.

The reason for this is simple: The chart was merely a derivative – or just another way to illustrate and visualize the overarching theme that’s driving so many of our cross-asset relationships these days… The sustained rotation out of Growth  and into Value.

We’ve written a lot about this theme since last year, and more recently have been pounding the table on a new theme that’s taken the forefront for markets across the globe… We believe we’re in for a trendless or rangebound period for risk assets as well as an increasingly bifurcated or mixed market. 

Much of this divergence in performance among various groups can be directly attributed to this trend toward value and away from growth.

Not only are we seeing prices roll over for growth areas, but we’re also noticing some concerning deterioration in internals for the first time in over a year. Although at the same time, value and cyclical areas of the market just registered fresh bullish initiation readings in a handful of our breadth indicators. Talk about a mixed market…

Then add the red flags we’re seeing from a sentiment standpoint along with the growing number of critical stock market indexes and commodities running into logical levels of resistance, and we believe a much more cautionary approach is warranted in the near term.

So, back to the Mystery Chart now. Most of you were buyers, and so are we. You can click here to see the original chart.

[Read more…]

[PLUS] Weekly Macro Perspectives – Focus is on the Fed, but Market Already Tapering

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From the desk of Willie Delwiche.

Key Takeaways:

  • Speculative excesses are being unwound as risk appetites reverse
  • Upward pressure on bond yields a headwind for equities
  • Liquidity is the lifeblood of the market and right now it is evaporating

While the Fed is musing about tapering, the market, as usual, is already in action. Upward momentum in bond yields and an economy that has soaked up liquidity have become headwinds for equities at a time when investors are already re-thinking risk appetites.

The S&P 500 is a week and a half removed from its highest weekly close on record, but many of the areas of the market that saw the biggest run-ups over the past 2+ years are in the midst of tumultuous pullbacks. After gaudy returns on the way up, investors should expect equally gaudy reversals on the way down. By way of example, the ARK Innovation ETF is more than 30% off its peak but is still up 180% since Jan 2019. Bitcoin too is 30% from its high but is still up 1000% since Jan 2019. These moves make the action in small-cap growth (15% below where it was in Jan 2021 peak but still 70% above where it was in Jan 2019) staid by comparison.

[Read more…]

[PLUS] Weekly Sentiment Report

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From the desk of Willie Delwiche.

Key takeaway: Amid the economic optimism that is seen in surveys and magazine covers, the stock market is experiencing an unwinding in speculative excesses that has just begun. This shift in risk appetite makes a healthy sentiment reset like we saw in March a less likely outcome this time around. More probably is that we are moving from excessive optimism to some meaningful degree of pessimism. This is the area of the sentiment curve when price is most vulnerable to correction. With upside economic surprises waning and near-term breadth trends more mixed, the choppy environment of the past few weeks could not only persist, but even intensify. 

Sentiment Report Chart of the Week: Magazine Covers

Like headlines, magazine covers can be more anecdote than an indicator. But they do give a sense of the public mood and the contrast between what appeared on the cover of The New Yorker in March 2020 (an empty Grand Central Station) and this week (New Yorkers emerging from the darkness and into the city bathed in blue skies and sunshine) could not be starker. As investors, we don’t want to overlook this shift from pessimism and despair to ebullient optimism.

[Read more…]

Short Their Optimism

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You know by the time the journalists get wind that things are good, it’s probably almost time for it not to be anymore.

We just saw the best 52-week period for stocks in over 75 years. You know what they were telling you the week that rally started? [Read more…]

Aussie/Yen Tests Resistance Again

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From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

One of the most frustrating questions plaguing investors at the moment is… “How long will this choppy environment last?”

And one question we’re asking internally is… “What is with all these mixed signals!?”

Once the latter clears itself up, we’ll have our answer to the former… But not until then.

When the outlook becomes increasingly murky, the best action is to take a step back, let the smoke clear, and weigh each new piece of evidence as it becomes available.

For now, the most important evidence we have is our list of risk-on commodities and equity indexes testing critical levels of interest grows larger by the day.

There seems to be no end in sight. Complicating matters further, we’re actually seeing this kind of price action throughout the risk asset landscape. It’s not isolated to a single asset class or region. We’re seeing it in Stocks, Bonds, Commodities, and even Currency Markets… and not just in the US, but also abroad.

There are plenty of consolidations taking place at key levels right now. But we aren’t seeing any decisive resolutions (yet). And that’s where we’re going to get our information. Until then, the environment is just a waiting game.

[Read more…]

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