From the desk of Steve Strazza @Sstrazza

Today, we put out a post outlining why we are bearish on Small-Cap stocks and want to be shorting the Russell 2000 ETF (IWM). Read it here as it sets the stage for this post.

Small-caps are the weakest area of US Equities. That's why we are expressing our bearish view on stocks via the Russell 2000 as opposed to one of the large-cap indexes, all of which the Russell has severely underperformed for several years now.

In line with our top-down approach, we don't just want to short an index. We are believers that playing the averages results in average returns.

For this reason, we've drilled into the Russell 2000, looked at every single chart and picked out the weakest names we could find with clearly defined risk management levels to limit us to the smallest of losses in the case these names mean-revert higher.

Adam Koos is a portfolio manager who uses Technical Analysis to make decisions for the clients he advises. In times like these, Financial Advisors all over the world are getting asked the hard questions. In this episode, Adam talks about how Technical Analysis has helped both his decision making and the communication with the families he works for. It's really cool to see these tools helping advisors everywhere, and especially a friend who I speak to regularly about markets and other common interests, like sports and wine.

Adam and I were coincidentally both featured in a Wall Street Journal article this week where we shared some of our favorite tools to help us in the current environment. He is the Founder of...

From the desk of Steve Strazza @Sstrazza

In January and February, we cautioned that we wanted to be selling stocks, raising cash and buying bonds due to bearish divergences and deteriorating market internals. At the same time, many major indexes and sectors had achieved our upside objectives and were at logical levels of potential resistance.

The Global Equity Market collapsed and the S&P 500 fell 35% soon after, blowing a hole in the long-term uptrend in most major indexes around the world.

In late March we wrote about bullish breadth divergences and the key levels of interest that made us want to err on the long-side over the near-term.

That ended up being the tradeable low we were looking for as stocks gained 30% and retraced more...

On our monthly conference call this week, we talked a lot about key levels in the most important asset classes in the world.

As promised, here's a run down of the 20 items on our checklist. I promise you the world is not ending if there are an overwhelming amount of yeses on this list.

Let's use this as a risk management gauge. I think this will help us answer the question of, How defensive should we be?

We made a spreadsheet internally for this and we'll send you regular updates and keep discussing this list as new data comes in.

In yesterday's Chart Summit, we spoke a lot about the relative strength in the Nifty Pharma sector. (You can watch the full videos of all the presenters for free.)

We got a lot of follow-up questions about a specific stock, Glenmark Pharma, so let's take a look and assess its absolute and relative trends.

In yesterday's Chart Summit, we presented our view on the major asset classes around the globe and noted what we need to see before getting bullish Equities again. (You can watch the full videos of all the presenters for free.)

Unfortunately, current conditions suggest continued volatility so we're looking for short setups to take advantage of it in the coming days/weeks.

Let's take a look at our broader thesis and what stocks and indexes we're shorting to express it in the market.

Since late March we've been watching to see how the counter-trend rally in stocks would develop...and while a few stocks under the surface continue to rally, the Nifty 50 remains stuck below its 2015-2016 highs and most stocks remain in downtrends.

Today we saw the Nifty 50 fail to hold above resistance at 9,000, providing us with a clear level to trade against on the short side to see if bears can retake control of this market. If we do see...

From the desk of Steve Strazza @Sstrazza

We are always looking at intermarket signals and ratio charts for insight into various asset classes. We've recently written plenty about intermarket relationships that signal risk-appetite, or lack thereof, for stocks as well as others to get a read on yields.

Today's Chart of the Day, High Yield Bonds (HYG) vs Short-Term Treasuries (IEI), is one of our favorite risk-appetite ratios.

Credit Market investors favor High Yield Bonds over Treasury Bonds during the "good times" - periods of strong economic growth, rising rates, etc. On the other hand, we know treasuries are a safe-have asset and outperform in environments where investors are uncertain and want a place to park their capital until the smoke clears.

Say what you will about stock market action since the equities bottom was put in on March 23rd, but either way you can't not be impressed.

Do we go higher from here?

I don't know the answer (hint: neither do you), but I do know that if we do, we're going to be continually led by the leaders in this bounce so far. And one of those leaders is the stock who's company everyone uses -- in some way -- whether you realize it or not: Google.

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?

Did you notice how shares of Advanced Micro Devices are trying to finally break out of this 20-year base?

This is a long-term candlestick chart I brought up on our Monthly Conference Call last night.  I used a line chart just to show how clean it is.

The "Multi-decade breakout" thesis is only valid if we're above those 2000 highs. If not, then by definition, it's not a breakout.

That level for me is $44:

This is the video recording of the April 2020 Conference Call.

Options premiums are still pretty elevated across the landscape and the default mode for me when looking for trades to put on is still to prefer selling premium to express any directional bets.

However, JC put some bullish metals ideas in my head last week that are starting to look interesting to me. And there's one in particular that warrants a shot with a debit spread -- where we can use the prevalence of still high options premiums to help us lower our cost of participation in a directional bet.

A question we're getting a lot these days is when the market ultimately does bottom, do we want to be buying the stocks that have been hit the most or the ones that have held up the best during the market's fall?

As with most things in markets and in life, the answer is it depends. In this post, we'll explain why.

This is the video recording of the April 2020 Conference Call.

We're all stuck at home these days and Zoom is how we get to hang out with friends and family.

This week I was chatting with my pal Jeremy over in Laguna Beach about Gold, Silver and Gold Mining Stocks.

I think there are some good opportunities in the space and I think there are areas in which to be patient.

Here's a short video of our discussion:

From the desk of Steve Strazza @Sstrazza

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

As this is something we do internally on a daily basis, we believe sharing it with clients will add value and help them better understand our top-down approach. We use these tables to provide insight into both relative strength and market internals.

This week we want to highlight our US Equity Index and Factor tables, as they are both showing near-term reversions in some of the most robust long-term intermarket trends.

Click on table to enlarge view.

This week we saw Mid (MDY), Small (IWM) and Micro-Caps (IWC) outperform the Large-Cap Indexes. If you look at the 1 and 3-month change data, you will notice this was a real divergence from the current trends across market-cap segments. In fact, Large-Caps have been outperforming their...