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 Impact of a Higher Dollar
We’ve talked a lot about the implications of a higher dollar. Long story short, it means lower prices for risk assets. This includes US stocks, commodities, and especially international stocks. They should all enjoy a tailwind if the dollar is to fail and roll over at these former highs.
Overlaying growth stocks such as the ARK Innovation ETF with the Dollar Index gives us a nice visual of this relationship. Look at the large base in DXY that has formed since its 2020 peak. If we were to invert that DXY chart it would fit seamlessly with the distribution pattern in ARKK, shown below. The two have a very strong negative correlation.
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 big picture context 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.
We held our June Monthly Strategy Session last Thursday night. Premium Members can click here to access the recording and the chartbook.
Non-members can get a quick recap of the call simply by reading this post each month.
By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends.
This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.
With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.
Last week, Carl Icahn filed a 13D revealing an ownership position of 5,089,703 shares in the natural gas services company Southwest Gas Holdings $SWX.
Icahn first purchased the stock in the second half of 2021. After a recent acquisition of an additional 2 million shares, Icahn’s total interest is 7.6%.
From a technical perspective, this rocky market is offering us limited opportunities on the long side.
While we continue to approach most equities with caution, insiders are buying into the volatility aggressively. According to data from Whalewisdom, the ratio of insider buys versus sales hasn’t been this high since early 2020.
While this is bullish, we still aren’t seeing much in terms of price confirmation.
Something we are seeing is plenty of options to choose from on our Inside Scoop list.
But while insiders are buying hand over first, the current environment warrants us to be far more selective. We only want to be in those setups that are offering the best risk/reward opportunities.
This week, we have our eyes on a mid-cap materials name that is coiling just beneath all-time highs.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Momentum thrusts abound.
The other day on Twitter Spaces, JC made the point that we hadn’t seen many bullish thrusts this year. He was right. There have been a handful of obscure ones, but nothing really stands out. Until now…
Last week, the High-Yield Bond ETF $HYG registered its largest single-day rate of change since spring 2020.
Not bearish, right?
Then, yesterday, copper futures followed this up by rallying over 5% and booking their largest daily gain in almost a decade.
Also, not bearish.
These types of strong momentum thrusts tend to kick off new uptrends.
We just covered the action in HYG and highlighted the major bottoms that formed under similar momentum conditions.
Today, we’re going to review yesterday’s thrust in Dr. Copper and discuss what a sustained rally from here could mean for risk assets.
Let’s dive in!
Here’s a chart of copper futures with a one-day rate of change in the lower pane:
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
The largest insider buy on today's list is a Form 4 filing by Column Group, which reported the purchase of approximately $5.8 million in NGM Biopharmaceuticals $NGM.
Kevin Riley, the CEO and president of First Interstate BancSystem $FIBK, revealed a purchase of approximately 2,900 shares in the regional bank.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Back in January, the big story was the yield on the 10-year US Treasury note printing new multi-year highs.
At the time, other benchmark yields worldwide were also resolving higher, completing large bases.
This was confirming evidence that added to our conviction US yields were headed higher and that we were in the early stages of a rising rate environment.
The confirmation from global yields proved valuable information.
Almost six months later, the US benchmark is just below 3.00%. As it pauses below a critical level, we again turn to overseas rates to get a read on the potential near-term direction of the 10-year yield.
And just like earlier in the year, they’re pointing higher.
Director Meridee Moore of Rayonier $RYN reported a purchase of 12,000 shares of her company's stock in a Form 4 filing.
The CEOs of Solo Brands $DTC, American Assets Trust $AAT, OPKO Health $OPK, SoFi Technologies $SOFI, and Doximity $DOCS all filed Form 4s reporting small purchases of their own stocks.
When investing in the stock market, we always want to approach it as a market of stocks.
Regardless of the environment, there are always stocks showing leadership and trending higher.
We may have to look harder to identify them depending on current market conditions… but there are always stocks that are going up.
The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too.
We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club. We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics.
Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports. Now, we're also highlighting lagging stocks on a recurring basis.
