Macro Monday - 01/25/2021
A brief note on my favourite high-level charts going into next week
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It’s Monday again…
Let’s rise and grind!
Also, I don’t think I mentioned it here, but last week I got an email from the CMT Association saying that I passed level 1 of the CMT program, so that’s cool!
Anyways, moving onto something more interesting to note this week was that tech’ish names were back! Twitter was on fire! 101 charts of AAPL, AMZN, FB, MSFT, NFLX, GOOG.
So… the question is, Are these 2020 leaders going to take back the leadership role after losing it at the end of last summer? Maybe.
Let’s have a look at the performance overview for week 3 of 2021
This week’s movers: Nasdaq 100 & Nasdaq Composite
This week’s losers: CRB & CCI
Broad participation continues to be the key theme, S&P 500, Russell 2000, NASDAQ-100, Dow Industrials, EAFE, and Emerging Markets are all coming off new highs.
On a relative basis, NASDAQ-100 testing their relative highs from September while the Dow Jones Industrials is doing the opposite and re-testing its relative lows.
Low volatility stocks posting new relative lows.
Momentum currently breaking out to new all-time highs on both an absolute and relative basis!
Internals look to be unwinding a little here, nothing to worry about tho!
Wasnt much change from last week, maybe they are still in holiday mode!
My proprietary momentum and relative strength ranking system is a numerical score that ranks all sectors and industries.
These sectors & industries are assigned a score based on twelve key technical indicators covering different timeframes.
Using this data, we can observe the sectors according to their technical rank to identify the leaders and laggards within a specific market area.
The Regime, Trend and Moment values also provide you with more data to fine-tune who are the leaders or laggards throughout the markets.
Regime: Bullish Regime indicates the 14-day Relative Strength Index reading is between 100-31 and remains until the value is less than 30 and a Bearish Regime indicates the 14-day Relative Strength Index reading is between 0-69 and remains until the value is more than 70
Trend: A positive percentage (coloured green) indicates how far the 50-day moving average is above the 200-day moving average and a negative percentage (coloured red) indicates how far the 50-day moving average is below the 200-day moving average.
Momentum: A positive percentage (coloured green) indicates that the 63-day rate of change is positive, and a negative percentage (coloured red) indicates that the 63-day rate of change is negative.
I am now moving on to the good stuff… charts! As always, I am going to share my favourite charts from my weekend charting session.
World
Emerging markets maintaining its strength versus the world with a multi-year relative high coming out of a 7+ year base. Sure does look like a Big Booty Base, Breakout, Re-Test and Go situation!
US
Let's check in on risk appetite.... yep, with weekly closing all-time highs, we sure are still in an environment where stocks should continue in the direction of the primary trend… and that’s up.
US Sectors
Large-Cap Tech, Discretionary and Communications are no longer on the sidelines and are participating as shown in the chart below with them all closing the week at new all-time highs. Will they take back the leadership role?
Defensive sectors are doing what they usually do in a bull market... lag relative to the broader market!
US Industries
People are still working from home, and they need hardware for the home office!
Fixed Income
This chart shows what environment we are in, for me it’s clear as day, buy stocks, sell bonds… simple… risk is on and has been since we broke out above 2020 highs in August.
Commodities
Platinum broke out of a 5-year base, is it now going to show some strength to the upside? It looks a little unsure at the moment.
Currencies
Euro with a breakout above a key inflection level, now back to re-test, now what? This is a key chart to watch, along with DXY, AUD/USD & AUD/JPY
Intermarket
One of the best and my favourite measures of risk-on behaviour for US equities is Consumer Discretionary vs Staples ratio. When Discretionary, outperform defensive areas like Staples as shown in the chart below, it typically expresses a healthy risk-appetite and suggests higher stock prices. I also see many other risk-appetite ratios support this current theme. Its a bull market, until it’s not!
Factor/Style
If we look down the market cap scale, Growth is currently working themselves off the ropes here.
Breadth
Here we have the Russell 3000 Percentage of stocks overbought. In the middle of last year, the indicator hit its highest reading in over a decade. Now we have seen another two more breadth thrusts, now that’s bullish! This chart shows the last couple of times it had extreme readings. As you can see, they turned out to be excellent long-term buying opportunities.
Themes
If FAANG stocks want to reassert themselves as the leaders of this market, we need to see them break out above the September peak.
That’s a wrap for today, hope you enjoyed my charts, and please don’t forget to share your ideas in the comment section or get in contact with me on Twitter @granthawkridge.
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Stay safe and good luck out there…
GH
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Grant - Great content! Quick question: How are you getting the color coding on your watchlists in Optuma?