Tuesday , April 20 2021
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Market Report: a pullback that’s largely driven by tech and growth stocks

Last week saw a wide divergence in the stock market. Sectors that exploded higher after March 2020 (e.g. tech, IPOs, growth stocks) saw sharp drawdowns while sectors that lagged significantly (e.g. energy & finance) are catching up. In this Market Report I will highlight a few indicators that matter right now. But more importantly, I’ll discuss how we’re investing & trading in this environment because at the end of the day, the only thing that matters is how you’re positioned....

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Market Report: Stock market trend in jeopardy

What a week it has been! Various markets saw noticeable declines on news of rising yields. The strong upward trend for stocks is finally taking a long-overdue breather and so is extreme sentiment. Let’s look at some bullish and bearish factors to give us a better idea of what the markets are doing. Table of Contents VIX spike VIX spiked more than 35% on a day when the S&P 500 fell less than 2.5%. This is a nervous market… This is also an unusual occurrence with only 7 other...

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Falling sentiment, commodities positioning, S&P 500 Growth vs Value

Falling Sentiment The recent decline in the NASDAQ 100 has caused the NASDAQ 100 Daily Sentiment Index to fall below 60 for the first time in more than 3 months. Looking at all the historical data from 2000 to present, this was a very bullish sign for stocks especially on the 3 month time frame. Commodities positioning Large speculator commodities positioning has reached a whole new level in recent days. Historically, this wasn’t great news for commodities. However, keep in mind...

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Foreign investment inflows, improving economy, S&P negative streak

by Troy February 23, 2021 Foreign investment The past 12 months saw record inflows into U.S. equities from foreign investors. It’s also interesting to note that foreign investment was consistently low until the mid-1990s when globalization really picked up steam. Looking at nominal numbers doesn’t really make sense since fiat currencies are constantly being inflated. To make this indicator more...

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Market Report: the Everything Rally continues

The market’s strong uptrend remains intact despite some lingering concerns about high valuations, extreme sentiment, and other overbought signals. Investors continue to pour into all markets (stocks, commodities, crypto etc.) with ever increasing liquidity. Now let’s look at some bullish and bearish factors to get a balanced view of the markets. Table of Contents Average momentum The non-stop rally across almost all markets has pushed many indicators to extreme levels. Taking a 9...

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Market Report: first year of a bull market, or end of a bubble?

This bull market is unique because unlike past bull markets, this one began with extreme speculation. Historically, extreme speculation occurred at the end of multi-year bull markets. This is why the markets are currently exhibiting extremely bullish signs (e.g. breadth today is similar to what you see at the start of multi-year bull markets) and extremely bearish signs (e.g. speculation today is similar to what you see at the end of multi-year bull markets). How do we reconcile these...

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Small caps’ strong momentum, oil rally, TLT fund outflows

by Troy February 11, 2021 Small caps’ strong momentum The Russell 2000’s massive rally has caused it to reach an all-time high on more than half of all days in the past 3 months. Historically, similar or higher streaks were only seen 7 other times. This was a more bearish than random signal for the Russell 2000 over the next 3 months. Oil/Gold RSI Oil’s recent rally pushed the oil/gold ratio...

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Less uncertainty, elevated volatility, overseas breadth

Now that vaccines are being distributed, Biden is president, and the global economy recovers, the U.S. Economic Policy Uncertainty Index is falling after a historic surge last March. The Uncertainty Index has dropped below 100 for the first time in almost a year. Historically, long periods of high (but easing) uncertainty led to more gains for stocks: VIX Speaking of prolonged periods of uncertainty, VIX’s streak above 20 is its second longest in history: Given the way...

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Market Report: how much further can this rally extend

Last week’s market volatility was followed by a sharp reversal higher. While various speculative concerns remain (record valuations, frothy sentiment etc), the stock market’s uptrend remains intact for now. Table of Contents Momentum The stock market remains firmly in an uptrend. Momentum clearly favors bulls with the Russell 2000 having rallied more than 7.7% this week: Historically, such large gains for small caps consistently led to more gains over the next 9 months. The one...

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