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.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… all would have been on this list at some point during their journey to becoming the market behemoths they are today.

When you look at the stocks in our table you will notice...

From the desk of Willie Delwiche.

The rally in the stock market over the past year has been buoyed by many things and its shows. The year-over-year change in the S&P 500 reached its highest level ever this week as the index moved past the anniversary of its COVID lows. One of the sources of support in recent months has been economic data that have been consistently better than expected. Stocks have tended to do well when economic data surprises to the upside and they tend to struggle when the surprises have been to the downside. While the Economic Surprise Index is still positive, it has come under pressure in March. First, expectations for the recovery are being revised higher, but more immediately, there were a number of data misses in recent weeks. For example, housing market activity for February was weaker than expected (we touched on this in this week’s Perspectives piece). Economic optimism is generally welcome and tends to be self-fulfilling, but if expectations move too far ahead of reality, stocks can find themselves on a rocky path.

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The recent pullbacks we've seen in a number of momentum names is offering us some advantageous opportunities to buy into some stocks we like at better prices.

One stock in particular is making a beautiful sound as it attracts my attention.

The Indian Rupee has been strengthening against its counterparts and that has been an interesting change in trend from what we were seeing in early February.

With that in mind. let's take a look at some important levels to track as this trend continues to play out.

From the desk of Willie Delwiche.

March in Wisconsin (especially here in Milwaukee close to Lake Michigan) is a season of it being already and also not yet Spring. Depending on whether the wind is blowing out of the warm Southwest or coming at us right off of the lake, temperatures can swing dramatically. But the consistent warmth of the Sun heats the Earth and gets the soil ready for planting.

It’s one of the most exciting times of the year for me, full of promise & expectation. I’ve already been at work in the garden (the areas, that is, that are already receiving enough sunlight to soften the dirt). One of several changes in my life over the past year was last Fall’s rebuilding & re-arranging of the raised beds in our backyard. I’m excited by the new layout but it means more work getting them ready for planting. The beds are pretty barren at this point. Rhubarb and horseradish will soon provide some evidence of life, and I tried to work around the asparagus, so hopefully that survived. Garlic, unfortunately, did not get planted.

This is the video recording of the March 25th Town Hall Meeting w/ Willie Delwiche & JC Parets

03/25/21 2PM ET

There are times to make money in the market and then there are times to keep your money.

In sports you play offense and you play defense.

Offense sells tickets, but defense wins championships.

That's how I learned it.

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.

A breach of 14,460 will lead to a lower high lower low formation on the daily chart, indicating an interim correction in the ongoing bull rally. The next level to track would then be 13,650, which is the next swing low. Up until now, the market has been largely messy...

This is what corrections look like.

When Consumer Staples bottomed out on March 1st relative to the rest of the market, that was one of the first signs of defensive rotation.

At the time, we chalked it up as just one signal, of many that we monitor.

But as the month has progressed, the soldiers continue to fall.

Aussie/Yen has rolled over and we're even getting a bid in US Treasury Bonds:

From the desk of Willie Delwiche.

Key Takeaways:

• Even with stimulus, the economy on a bumpy road
• Bottlenecks testing the resiliency of recovery
• Despite stress points, growth heading in a favorable direction

Apparently, there is a ship stuck in the Suez canal. Pictures show the “Ever Given” container ship turned sideways in the narrow waterway, with its bow wedged on one bank and its stern close to the other bank. This ship, according to the Wall Street Journal, is one of the largest in the world. It’s 400 meters long (longer than the Empire State Building is tall) and can normally move 20,000 containers. In the current situation not only is it not moving its 20,000 containers but has ground to a halt all traffic in both directions in one of the world’s busiest waterways. On average, 55,000 containers travel through the canal on a daily basis, in addition to numerous ships carrying oil and liquified natural gas. The goods are there, but they are not moving.

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We've seen quite a move lower in $TLT (which moves inversely to interest rates) since this summer.

Is the bottom in?

My crystal balls says: "Don't ask me stupid questions." So, that's no help.

But here's what I know:

• Implied volatility priced into $TLT options is relatively high, though declining from recent high levels.
• We have a clearly defined level (of perhaps temporary) support at $133.
• High volatility gives us the ability to short options and gives us plenty of room to be wrong and still make money.

The bet I'm making is $TLT is going to chop around in a bit of a range over the next 2-6 weeks and this will cause volatility to contract.

So here's how I'm going to play it:

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.

At the same time, some of the former market leaders have retreated since February and are currently hovering near key levels. Similarly, even the markets' more recent leaders have shown signs of weakness the past few weeks as some have violated critical tactical levels while others are consolidating at logical levels...

Bear Markets are environments where a majority of stocks are falling in price for a prolonged period of time.

Sometimes you'll hear lies about a 20% decline defining such things, but that's just bullshit.

The number 20 is a completely arbitrary number that has absolutely no meaning. Thinking it does is foolish. Why 20? Why not 19.5? or 20.2?

There is no reason. They're just lies.

If you ever hear anyone say that, "A bear market is when it falls 20%", you know it's because they're in the entertainment business, not in the truth business.

Stay away from those kinds of people. They're not here to help.

It's their job to distract, it's our job to ignore.

In reality, expansions in the new low lists are things you’ll find near the beginning of market declines. You’ll see spikes in these lists that haven’t been seen in years.

Here's what this looks like coming into the week. It's still a ghost town:

From the desk of Willie Delwiche.

Key takeaway: After a healthy unwind over the past few weeks that allowed sentiment to reset to neutral, we are seeing optimism rebuild. This uptick in optimism has been accompanied by (as we show in our chart of the week) another breadth thrust. There is room for a further expansion in optimism before it becomes an excessive headwind - and continued broad market strength diminishes such a signal in any event. The combination of breadth thrusts and persistently elevated optimism is reminiscent of the late-2016 to early-2018 period. Then, equity ETFs saw 20 consecutive months of in-flows - we are currently in our 10th consecutive month of inflows (although the pace is quickening, with a record $100 billion over the past four weeks). Equities ran into trouble in early 2018 when breadth thrust tailwinds subsided but elevated optimism remained.

Sentiment Chart of the Week: Another Breadth Thrust 

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We don't need to make a whole thing about it. But I did just want to take a moment to thank everyone for the last 10 years.

I wrote my first blog post on this site in March of 2011. That was 10 years ago this month.

It’s been a pretty unbelievable ride ever since.

I don’t even know where to start. Hopefully one day I can write a book about it and tell you the whole story.

There are so many people to thank that we’d be here forever.

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.

Now let’s take a look at some actionable ideas at current levels that look attractive on the long side for the next few weeks and months.

TCS is hovering close to its resistance and looks good for another leg of the rally. The price is back above the crucial level of 3...