From the desk of Steve Strazza @Sstrazza

Energy has been by far the best-performing sector over the trailing 12-month period.

In October, we witnessed a handful of energy stocks and industry ETFs break higher from bases and reclaim their summer highs.

Without a doubt, these are bullish developments for the space. 

But over the trailing month, energy has lost that leadership position and has actually been the worst-performing sector in the market. 

Today, we’re seeing a lot of the upside resolutions from last month undercut their former highs and turn into failed breakouts.

So, where do we go from here?

When we look at the relative trends in the energy sector, we get a much different picture than what we’re seeing on absolute terms. Most of them never resolved higher like their absolute trends and simply remain messy, with prices stalling at the upper bounds of their basing patterns.

If we’re going to see sustained outperformance from energy stocks, we need to see them resolve higher relative to the broader market. 

This is the video recording of our November 19, 2021, All Star Charts Crypto Weekly Strategy Session.

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Over the past few weeks we’ve seen a handful of major indexes, like small and mid-caps, resolve higher and kick off a fresh up leg. But breadth has really cooled off since then, as participation has been declining despite the major averages rallying.

This week, we’re finally seeing that weakness show up at the index level -- particularly from SMIDs and cyclicals.

When we were reviewing our breadth charts, we noticed the deterioration in energy sector internals has been particularly bad. Not only is breadth not confirming the new highs from energy stocks… but there are actually some pretty ugly divergences in our new high indicators. 

Energy stocks are currently vulnerable, sitting just above their breakout level at former resistance. Considering the lack of support from internals, this group is on failed breakout watch.

Let’s take a look under the hood and discuss what we’re seeing.

Energy has been coiling in a continuation pattern above its year-to-date highs around 56 for over a month now. You can see this in the upper pane of this chart:...

This is the video recording of the November 18th Weekly Town Hall w/ Willie Delwiche

11/18/21 2:30 PM ET

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

On Tuesday night we held our November Monthly Conference Call, which Premium Members can access and re-watch here.

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

Let’s get right into it!

From the desk of Willie Delwiche.

Last week, I wrote about how stillness can be the riskiest decision. 

This week, I want to discuss how periods of stillness can be part of the best approach. 

This idea brings to mind my favorite bird: the Great Blue Heron. If I have a spirit animal, this would be it.

Over the last few days, we've made our thoughts pretty clear regarding the broader crypto market over long and short time horizons.

So let's have a quick summary:

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

TIPS versus Treasuries is one of the most important charts we’re watching right now, as it's hitting its highest level since early 2013. Relative strength from TIPS hints that investors are positioning themselves for a sustained surge in inflation.

This makes sense given both the five- and 10-year breakeven inflation rates have reached their highest levels in more than a decade. 

As investors react to signs of impending inflation, many cyclical stocks that benefit from higher rates are catching a bid. A great example of this is the Metals and Mining ETF $XME.

Let's take a look!

Below is a chart of XME overlaid with the TIPS versus Treasuries ratio and correlation study in the lower pane:

If investors are anticipating higher inflation in...

From the desk of Willie Delwiche.

Key Takeaway: Bullish sentiment is on the rise. The bears may be reluctant to leave the party, but the bulls squarely outnumber their counterparts. The AAII survey shows bulls exceeding bears by two-to-one, and the II bull-bear spread is back within a high optimism zone. At the same time, options markets reveal that volatility and fear are being replaced by complacency. Though optimism has risen sharply during the past few weeks, current levels do not present risk. However, problems may arise when the lofty expectations associated with the sentiment backdrop are not met.

Sentiment Report Chart of the Week: Risk On Buffett Lacking Calories

While risk appetite has returned (NASDAQ and CBOE equity options volume have turned sharply higher), this is not translating into clear strength from higher risk (e.g. risk on) parts of the market. To the extent that our risk on / risk off ratio has been moving higher, it has more to do with risk off weakness than because of risk on...

From the desk of Steve Strazza @Sstrazza

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.

Welcome to the...

Wednesdays are becoming my favorite trading day of the week.

What the heck is so special about Wednesday? Well, nothing really. But it's the day when all the All Star Charts analysts converge on a weekly internal zoom call and throw out our best observations and ideas. We start identifying themes. What's new? What's old? Where aren't people looking? Where are our blind spots? What would have to happen for us to change our view? What's the best music to listen to while charting and strategizing? (I prefer anything instrumental -- no singing).

Now, to be fair, when the nerds start geeking out about currency pair relationships and long-end versus the short-end of interest rates, that's when I pretend to be listening and interested. But when the conversation comes back around to individual stocks, that's when my ears perk up.

So, today, when it came around the horn to me, I mentioned to the guys that I'm really liking this setup in Valvoline $VVV that the team highlighted in their most recent Young Aristocrats report.

From the desk of Steve Strazza @Sstrazza

Dividend Aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.

As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.

Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for five to nine years.

We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money.” Imagine if years of consistent dividend growth and high momentum and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.

By adding our technical...

There's been some downside volatility over the last few days.

When the market is indiscriminately selling off, we're looking for the small patches of green -- the names that are bucking the trend and resisting the selling pressure or even moving higher.

When the red of the market turns green, the green has a tendency to turn even greener.

It's relative strength at its best.

So given the current backdrop of this recent near-term volatility, let's pose the same question.

Where's the leadership?

Precious metals have been bearing the brunt of being the most underperforming asset class for over a year now. While we saw stocks and commodities rally, precious metals were moving sideways or undergoing correction. And this was regardless of where the US Dollar was headed!

But there's a movement coming through in the precious metals, which is important to observe. We are here to do just that.

Traditionally speaking, the Dollar and Gold have moved in the opposite direction. They have an inverse relationship so to speak, and that is depicted by the chart below.

As can be seen in the image below, the US Dollar and Gold have a strong negative correlation. This is evidenced by the correlation coefficient in the bottom pane. While there are times when they move in the same direction, the traditional relationship catches up pretty soon.

Notice how when the indicator contracts, the negative correlation reduces. But the inverse relationship persists beyond short bursts of positivity.

Click on the chart to zoom in.

This is the video recording of the November 2021 Mid-month Conference Call.

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

The US Dollar Index $DXY is pressing to new highs, disregarding what many think it should be doing based on historic intermarket relationships.

Considering the bullish developments and new highs from risk assets, the strength from the US dollar continues to be a head-scratcher.

But will the breakout in the DXY hold, or will it roll over and confirm the signals coming from bonds, stocks, and commodities?

When we broke down the US Dollar Index last month, we pointed out that its strength was rather narrow in terms of how it was performing relative to most individual currencies. Long story short, the recent rally in DXY has been fueled primarily by its two largest components -- the euro and the yen. These two currencies make up more than 70% of the DXY weighting, and the fact that they are at new 52-week lows explains why the index is at new highs.

But we're still not seeing the same kind...

From the desk of Willie Delwiche.

Key Takeaways:

• Inflation pressures surge and market is looking for more
• Bonds pricing in rate hikes but real yields remain buried in negative territory
• Gold finally taking a shine to favorable fundamentals as price action improves

Fed Chair Powell has referred favorably to the Trimmed Mean PCE Price Index, published by the Dallas Fed, as a gauge of inflation that does a good job of tuning out noise and distilling the trend. Looking at this index, there have been a couple periods over the past decade when price pressures softened and inflation unexpectedly fell short of the Fed’s 2% goal. Even still, inflation bottomed in the immediate wake of the Great Recession and has been trending higher since. In the months prior to COVID, the Fed was hitting its inflation goal and the 12-month change in this index was edging up to its highest level in over a decade. Inflation has intensified over the...