One thing we know about new lows is that they are not a characteristic of uptrends.

We know this.

So here's an update on that whole Growth vs Value thing: New Monthly closing lows all the way down the cap scale.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Here we are on Friday, and it's been yet another eventful week for the commodity complex.

Steel futures ripped higher. Corn was limit-up on Thursday. Lumber continues to digest its gains with the same volatile fashion it made them in, giving back another 10% on the week.

And then of course there's Dr. Copper which appears to have successfully defended former resistance turned support at its all-time highs from 2011. It's impossible to overstate the importance of how this massive base in Copper resolves.

Bulls definitely don't want this move to evolve into a failed breakout... The 4.50-4.60 zone is the line in the sand. 

As for Energy Markets... Crude Oil making its highest daily close since October 2018 might be the biggest development of all.

We’ve talked a lot about Crude...

What if these consolidations in Financials and Materials do NOT resolve higher?

What then?

From the desk of Steve Strazza @Sstrazza

Earlier in the week, we held our May Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting 5 of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

Do you see something else here?

Massive tops? Check.

Lower lows? Check.

Lower Highs? Check.

On the this episode of Bearish or Bullish we talk about the Crypto Crash and how when Futures opened up on Sunday, they didn't care. Stocks were actually up a little. That's the market signaling to us that there is no systemic risk right now in Crypto. And we're not even close.

That's probably a good thing, and more bullish for the Crypto space considering how much larger it would need to get to really become intertwined with Stocks and Bonds, which combined are over $150T in market cap. Crypto is only 1.6T, just to put things in perspective.

We also discuss the latest Minor Leaguers Report which scouts the farm system for Small-cap stocks between $1-2B in market cap before they get called up to the Mid-caps ($2B+)

Relative strength in Bonds and European Banks. But is that sustainable? What should we expect?

All this and why Chardonnay is the world's most versatile grape on the latest Episode of Bearish Or Bullish.

Enjoy!

From the desk of Steven Strazza @Sstrazza

Check out our latest Mystery Chart!

What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.

This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.

It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!

The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.

While you can try to guess the chart, the point is to make a decision…

So let us know what it is… Buy, Sell, or Do Nothing?

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 we...

They say that you shouldn't kick someone when they're down. But in the markets, that's actually the best time to kick them, when they're already down.

We call that "Relative Weakness". When we're shorting stocks, those are the ones we're looking for.

In the case of Small-caps, they've been a heads up of a problem in the stock market since almost 3 months ago. They suggested stocks would struggle and would go sideways, at best.

And that's exactly what we've seen. Many stocks and sectors going sideways, and a bunch of them going down.

BUT, if we're going to go from Bad to Worse, then Small-caps are most likely the ones getting hit the hardest. 

You can see in these breadth numbers that the internals in Small-caps have not been improving, they've actually been getting worse.

From the desk of Willie Delwiche.

Key takeaway: Sentiment continues to shift from optimism to pessimism. Unlike the March optimism unwind, the current situation is associated with a waning risk appetite on the part of investors and a more challenging liquidity environment. This argues for patience from a tactical perspective and warns against a premature conclusion that the speculative excesses have been removed from the system. While the pullbacks in some of the speculative areas may seem substantial, they still pale in comparison to the run-ups that were seen in late 2020 and early 2021. In such an environment, less may be more. Surviving such unwinds is not only about preserving capital, but also maintaining mental health.

Sentiment Report Chart of the Week: Risk Appetite Wanes

High-yield corporate bonds are beginning to roll over relative to their safer alternative. This indication of cooling risk appetite is one of the key differences between the sentiment reset last March...

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

We’ve recently pointed out the possible double tops in the Dollar index and the USD/CAD, along with our overall outlook for further weakness from king dollar.

But can we find other areas of the market that could provide further insight into the US Dollar’s direction?

After all, many market participants are fixated on the direction of the US Dollar right now as it approaches its key mutlti-year lows.

Why does the Dollar matter so much to investors?

Firs of all, USD and risk assets have had a very strong negative correlation over the last several years. The USD Index bottomed in early 2018 as stock markets around the world peaked. Conversely, the dollar topped during the Covid sell-off when stocks bottomed out at their March 2020 lows.

To gain a clearer picture of the USD, we need to go beyond the Dollar Index and developed currencies.

Let’s look at a couple of charts of emerging currencies as they provide valuable information on broad USD performance, as well as...

This is the video recording of the May 2021 Conference Call.