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Expert technical analysis of financial markets by JC Parets

RPP Report: Review. Preview. Profit. (04-26-2021)

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From the desk of Steve Strazza @sstrazza

At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

The weight of the evidence still suggests it’s prudent to be a buyer, not a seller, of risk assets for more meaningful time horizons.

Shorter-term, the market looks increasingly messy. For the first time in over a year, defensive assets are beginning to stabilize at logical levels of support, while stocks and major risk groups achieve our upside targets. Even a handful of some key Intermarket ratios are potentially diverging from the broader averages.

The macro backdrop definitely leans that this is just a sideways consolidation in an ongoing uptrend.

Let’s not forget that the S&P 500 has just recorded its greatest 52-week gain since the late 1940s, so some digestion is perfectly healthy and deserved!

[Read more…]

Mystery Chart (04-26-2021)

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

Check out our latest Mystery Chart!

What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.

This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.

It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!

The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.

While you can try to guess the chart, the point is to make a decision…

So let us know what it is… Buy, Sell, or Do Nothing?

[Read more…]

[PLUS] Weekly Market Notes & Breadth Trends

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From the desk of Willie Delwiche.

Key Takeaway: Stocks have benefitted from an historic stretch of good news. Commodities suggest higher inflation may not be transitory. Global breadth trends turning higher.

With both Energy and Communication Services faltering in recent weeks, the sector leadership group has narrowed to Materials, Industrials, and Financials. Materials, which took over the top spot in the rankings this week, is the rare sector right now that has been a leader on both a short-term and long-term basis. Health Care and Real Estate (both of which made new highs last week) are climbing in the rankings and if recent strength persists could soon join the leadership group.  Our industry group heat map shows continued leadership from mid-caps overall.

[Read more…]

The Minor Leaguers (04-26-2021)

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From the desk of Steve Strazza @Sstrazza

In our continued effort to identify individual equities that fit within our larger Macro thesis, we recently rolled out our latest bottoms-up scan: “The Minor Leaguers.”

We write a post every other week where we outline some of our favorite setups from this universe of stocks.

We’ve already had some great trades come out of this column and couldn’t be happier about the early feedback.

Moving forward, we’ll be rotating this column with “Under The Hood” each week.

Ultimately, to make the cut for our Minor Leagues list, you must have a market cap between $1 and $2B. There are also price and liquidity filters.

Then, we simply sort the stocks by their percentage from new highs. Easy done.

The idea is to catch the strongest names while they’re still small and have serious upside potential. If any of these stocks ever climb up the ranks to the big leagues, just imagine the returns. We’re looking at 5-10x moves just to break into large-cap status!

And what better time than now to launch a small-cap-focused column? We’ve seen robust evidence of a structural rotation down the market cap scale, suggesting a new period of outperformance from small-caps in the coming months and quarters… Maybe even years!

This column is a great way to take advantage of that trend.

Let’s dive in and check out this week’s list of the hottest stocks in the Minor Leagues.

[Read more…]

Bro, do you even chart?

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After some recent events over the weekend, I thought this would be as good of a time as any to remind everyone, once again, what Technical Analysis actually is….

Technical Analysis is the study of the behavior of the market, and therefore its participants, as opposed to the goods and the services in which a particular market deals. 

If you are recognizing that the trend for stocks is up, or maybe down, you are a Technician.

If you acknowledge, in any way, that the fed purchasing bonds impacts market prices, you are a Technician.

If you think volatility for stocks is low, or high, or that the Volatility Index $VIX is even a thing, you are analyzing a price derivative of the S&P500, and therefore, performing classic technical analysis.

Are you analyzing the behavior of the market and its participants, or the goods and services in which the market deals?

All of these above represent the former, and completely ignore the latter. [Read more…]

Filed Under: ASC

[PLUS] Weekly Top 10 Report

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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.

The Growth Vs Value Cheat Code

We’ve pounded the table about that 1.70 level being the line in the sand for the relative trend in Growth vs Value. If we’re below there – which we believe we’re likely to remain, then we want to continue to be overweight Value and cyclicals. If the ratio decisively reclaims this level then we’ll have to rethink our entire thesis, along with that of a new Commodities Supercycle. But, that’s not the bet we’re making at all.

The chart below shows Growth vs Value (IWF/IWD) overlaid with Tech vs Financials (XLK/XLF) as these are the main drivers of the two factors. We believe there is incredible information in the Tech vs Financials ratio. It was tested, and successfully defended in both April and June of last year, as well as again in early March of this year. Clearly, this area is a battleground for this relative ratio… And we think it holds the key to where the Growth vs Value trend is finally headed for this next cycle. Now that Growth and Tech have experienced about a month and a half of mean reversion, which although hard to see is actually illustrated in both of these ratios as XLK/XLF has rebounded strongly off that 3.70 level and is currently above 4. 

Likewise, Growth vs Value has rallied back to its pivot lows from November and January at that absolutely critical 1.70 level during this same time… and to no surprise, looks to be failing.

Possibly the best piece of evidence – aside from IWF/IWD remaining below 1.70 itself, of course – is seeing XLK/XLF finally violate those critical dot-com bubble highs at 3.70. If and when this happens, all bets are off for Growth and it’s time to pile in on the global growth, reflation, cyclicals & value, and overweight risk assets in general theme. That’s the cheat code… 3.70.

[Read more…]

[PLUS] Weekly Momentum Report & Takeaways

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

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.

[Read more…]

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