From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

In today's post, we’ll discuss some of our favorite and most important intermarket ratios and see what they’re suggesting for markets and risk appetite around the globe.

One thing we found interesting when digging through these charts is that many of them look a lot like stocks do right now. 

Sideways. Range-bound. Messy. But, within the context of underlying uptrends.

So these are basically just continuation patterns on shorter timeframes.

But, after consolidating for months and even quarters now, we are beginning to see some resolve higher… kind of like we’re seeing from stocks on an absolute basis.

Coincidence? Probably not.

We think this makes a lot of sense and bodes well for risk assets. Let’s take a look at some of these charts now.

Here’s one of the most important cross-asset ratios we track, and it’s a great example of exactly what we’re talking about. 

This is the stocks-versus-bonds ratio $SPY/$TLT:

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From the desk of Steve Strazza @Sstrazza

Financials have made quite the comeback in recent weeks, with the Large-Cap Financial SPDR $XLF trading back to record highs as bank stocks around the world have fought to repair some of the damage endured during Q2.

We even saw regional banks break back above a major level of interest last week. The importance of this can't be overstated.

But that's just the US. What are financials doing in the rest of the world? Are they confirming this strength we're seeing from the US?

In this post, we’ll provide an in-depth rundown of what’s going on with this critically important sector--not just in the US, but around the globe.

Let’s kick things off with last week’s mystery chart. As always, thanks to everyone who participated.

We asked whether the recent highs were a false start or a failed breakout. The answers were skewed in favor of the bulls, as most of you said it was merely a retest of the previous highs. And it looks like you were right!

Here it is... the S&P Global Financials Index $IXG:

Do you have any exposure to Energy?

Then this is the chart for you!

It's Crude Oil stuck between 76 and 66:

How's the market done in 2021?

That's a tough one to answer.

And I'll tell you why.

January was still what most of 2020 was like. The environment isn't going to change based on the calendar year. It's going to do what it wants.

From the desk of Willie Delwiche.

Key takeaway: Sentiment continues to argue a case for caution. Pessimism remains near historical lows. Nasdaq trading volume dwindles along with risk-seeking behavior. And with the economic surprise index slipping below zero, better than expected economic data no longer provides a tailwind. Yet, pockets of strength remain (including the earnings revision trend) and optimism has ticked higher across our sentiment indicators. Active investment managers have increased their exposure, throwing caution to the wind during a seasonally challenging period. All this does not lessen the real risks associated with the lopsided sentiment that tilts toward extended optimism.

Sentiment Report Chart of the Week: Analysts Still Playing Catch Up

The earnings revision uptrend has slowed its ascent in recent weeks, but it continues to move higher. Overall earnings expectations for 2021 have risen by nearly 20% since the beginning of...

Whenever Frances calls to chat about the market, she knows she's getting a yes!

Frances Horodelski and I have been doing this for about a decade, through multiple cycles. It's always fun!

She was hosting a commodities-focused show today so we discussed Metals and Energy.

I think there is a lot going on in this space and it's setting up for a big move.

We couldn't help but talk Financials and Crypto, but it was mostly Commodities.

Hope you enjoy!

The latest Follow the Flow report is out, and as always there is a play therein that caught my attention.

It's a bullish idea, but I'm going to play this one in a unique way in order to hedge myself a bit in a tape that feels a little sluggish at the moment. I want to get paid to wait out the slow times we're likely to "enjoy" from now until Labor Day weekend, and possibly beyond. So this will involve a calendar spread, but with a twist...

From the desk of Steve Strazza @sstrazza

Welcome to our latest RPP Report, where we publish return 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.

We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.

We've been pretty obnoxious about our position that markets are a total mess these days. While this remains the case, we've seen some positive developments play out lately... particularly the renewed strength from cyclicals and offensive assets.

We've covered the best evidence from both the bulls and bears camp in recent months, and even played devil's advocate with the data we...

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

The US Dollar Index $DXY has been a good reminder that price doesn’t always move in a straight line. 

Paul Tudor Jones has been quoted saying “markets only trend about 15% of the time.” The textbooks will tell you it’s somewhere between 20% and 30%. But it all comes down to how you’re measuring it.

We think it’s fair to say most markets trend about 25% of the time on a structural basis.

And the present year two market conditions have been a great illustration of what they look like the other 75% of the time… range-bound... sideways... a hot mess.

Speaking of which, last week, we pointed out that Dollar strength had stalled and that things were beginning to look messy on shorter time frames. 

Many of the long USD trade setups we laid out in late June have yet to break out and are currently testing their...

From the desk of Steve Strazza @sstrazza

This is one of our favorite bottom-up scans: Follow The Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.

We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients. Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.

We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty penny...

The market has spoken.

You might have your conspiracy theories about market manipulation or inflation or whatever story they're telling these days.

But it's only the price that pays. We just want to sell things at higher prices than where we buy them.

And you're going to have a hard time finding a worse investment over the past year than Precious Metals.