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.

While the same themes we've laid out in previous reports continue to hold strong, we have seen some recent deterioration, particularly in the large-cap sectors and indexes.

Despite an increase in bearish developments, the overall weight of the evidence is still firmly in the bull camp, and we remain aggressive buyers of stocks and risk assets, particularly over any longer-term timeframe.

The market has been moving sideways for two months now. But that does not mean that every sector will reflect the same move.

As the story of a market cycle unfolds, various sectors assume importance just like different characters in a play. Currently, the Chemicals segment is in the spotlight so let's see what its constituents are up to!

The Chemicals segment has been showing strength over the past few days with some interesting setups lined up. We included one such setup in our Trade of the Week post.

First up, we have Pidilite Industries which is now moving back into positive territory as it inches towards its overhead resistance at 1,800. The price has consolidated in the range of 1700-1820 and looks ready for a breakout as the indicator attempts to move higher. With the overall sector in focus, Pidilite could be dolling up to participate in the next leg of the rally.

We are bullish above the risk management level of 1,820 with a target near 2,030.

Click on chart to enlarge view.

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.

In order to make it onto our Minor League 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.

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying stocks as they climb the market-cap ladder from small, to mid, to large, and ultimately to mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B) they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market as that is typically where these potential 50-baggers come from.

Markets across the globe have been taking a breather as the momentum cools off. Taking a closer look back home, the indices have been largely choppy and have consolidated over the past two months.

Is this merely a consolidation? Or are we looking at a minor correction ahead? Let's take a look at what the charts have to say.

In our Three Charts for the Week post, we talked about the resistance Nifty had been facing at 15,400 and also highlighted the crucial support at 14,460. We noticed a divergence in Nifty in January and that has continued to play out as the rally progressed. Within the current setup, the price hasn't been able to move past the 15,400 mark, in addition to now challenging the support level of 14,460.

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.

We continue to reiterate the same themes and pillars that support our bullish macro thesis. This would include an abundance of evidence pointing to risk appetite, rising developed market yields, strength from commodities, and of course the ongoing rotation toward cyclicals, value, and international stocks, among others...

Just about anywhere we look, we're seeing investors gravitate further and further out on the risk spectrum.

How often have we heard that sector rotation is the lifeblood of a bull market? Too often! And there's a reason why it's necessary to repeat this statement. At different stages of a cycle, varied variables are at play. This means that every sector will not move in a uniform manner.

Over the past three months, IT has been consolidating as other sectors took the lead. With sector rotation at play, it seems like IT is back in the mix.

Let's take a look at what IT is doing relative to Nifty 100. After breaking out of an almost 12-year base, Nifty IT has been holding on to the high levels displaying inherent strength. Bouncing off its support the ratio chart favours a positive move in this index going forward.

Click on chart to enlarge view.

From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts

The same strong rotational currents that have been in place in the US since last summer have finally begun to spill over to International stocks... but, not all of them.

For the first time in about a decade, evidence suggests that stock markets around the world have finally built a strong foundation relative to their US counterparts, and might just be ready for a sustained period of outperformance.

How big the move will be and how long it will last are always some of the most difficult variables to predict. We can merely position ourselves accordingly based on the information we do have, and then be keenly aware of new data points as they come in, and constantly re-evaluate and adjust our outlook as appropriate.

As for the potential structural bull-to-bear reversal in the long-running trend of outperformance from US stocks... the seeds have definitely been planted for such a development to occur.

From the desk of Steve Strazza @Sstrazza.

Welcome back to our “latest Under The Hood” column for the week ended March 19, 2021. As a reminder, this column will be published bi-weekly moving forward, and rotated on-and-off with our new Minor Leaguers column.

In this column, we analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.

We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.

From the desk of Steve Strazza @Sstrazza

What's the FIRST question investors should ask themselves and have a clear and concrete answer to before putting money in the market?

It is literally step one. The cornerstone of any strategy or trading plan...

What is my objective?

Every investor should examine this thoughtfully and keep it top of mind to ensure that their investment decisions are aligned with their investment goals.

Usually, the answer is pretty simple and comes down to maximizing returns, or more importantly minimizing losses, in a way that fits within each individual's unique preferences.

But as we'll explore in this post, this isn't always the case, and sometimes it can be a bit nuanced - as is the case with Environmental, Social, and Governance investment strategies.

So as an exercise let's put ourselves in the shoes of ESG investors and ask a few simple questions...

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

Two things we've been pointing to this week are the potential failed breakouts in Small-caps and Micro-cap stocks, which would confirm a series of bearish momentum divergences. And also the relative strength out of Consumer Staples throughout March, which is something we haven't seen in a long long time....

Remember, Consumer Staples outperforming is consistent with a market environment where stocks are under pressure.

Here's that chart showing Staples potentially confirming a rare "Diamond" reversal pattern relative to the S&P500: