I'm sorry that I had to miss yesterday's Town Hall.

I had a great slide deck prepared (ASC+Plus subscribers can click below for access) and was excited to walk through it with everyone. We are seeing a breakout in our risk on / risk off ratio, continued improvement in sector-level trends, and evidence that sentiment in Emerging Markets looks pretty washed out. While there may be opportunities for following strength and rotating away from US equity exposure, Germany (which is at a 17+ year low versus the S&P 500) is not one of them. I'm sure we will have a chance to talk through many of these things in the days ahead.

As some of you know by now, rather than spending the morning and early-afternoon getting ready for our Town Hall conversation, I was saying a final good-bye to the gentlest of spirits and an ever-faithful friend. Our family dog, Banjo, had a health emergency from which the vet told us there was no reasonable chance of recovery.

Banjo joined our family over a decade ago, just after our youngest learned to walk and had the balance to withstand the affection of an exuberant puppy. Banjo's exuberance for affection and companionship was his...

From the desk of Willie Delwiche.

Federal Reserve officials have talked about the benefit from having well-anchored inflation expectations. It provides flexibility in setting policy even as recent inflation readings have moved to their highest levels in years (or in some cases, decades). In fact, in recent speeches several have made the case that inflation expectations becoming un-anchored would prompt a meaningful re-evaluation of current policy. That now seems to be the case. Data from the University of Michigan’s Survey of Consumers shows 1-year inflation expectations have risen to their highest level since 2008 and the pace of increase is its fastest in nearly two decades. Survey responses can be cheap, but market-based expectations reflect actual positioning and prices. Market data shows that the 10-year breakeven inflation rate has reached its 2011 and 2012 peaks and it hasn’t been higher in over 15 years. The inflation expectations discussion could be moving from “if they remain well-anchored” to ”since they have become unmoored.”

...

If you take the US Dollar out of the equation, it's a much different story for Gold.

While Gold continues to struggle below its 2011 highs, when priced in other currencies, it's been consolidating well above those former highs.

This is the video recording of our October 22, 2021, All Star Charts Crypto Weekly Strategy Session.

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

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

September saw significant selling pressure in equity markets. The S&P 500 suffered its worst drawdown since last year, and many of the major indexes made a lower low. But when we look under the surface, it really wasn’t that bad. 

We didn’t get an expansion in new lows to confirm the new lows in price. Instead, these readings remained muted across most of the major averages in the US.

Since then, the bulls have regained control. Breadth has improved throughout October as the indexes have rallied back toward their former highs. Although we haven’t seen a real expansion in participation at the index level, things have definitely been moving in the right direction.

Let's talk about it.

Here’s a look down the cap scale at new 52-week highs for all three S&P indexes, from large to small:

Fewer stocks are making new highs today than they were when markets peaked back in September. 

But we are seeing some important...

From the desk of Willie Delwiche.

"If you board the wrong train, it is no use running along the corridor in the other direction."

• German pastor and Nazi resistor Dietrich Bonhoeffer

If the train you are on isn’t going where you want to go, changing locations on the train is of little use. You are still going to wind up in the wrong place. 

Sometimes, we believe a train is heading to one place, when it’s actually going somewhere else. Or, after boarding, our view of where we would like to go changes entirely. In either case, we are on the wrong train and need to think about how to get off. 

Bitcoin officially made an all-time yesterday, eclipsing its first-half highs around 65,000.

The importance of this cannot be overstated.

The question is whether or not Bitcoin can stick the landing. It's likely to be a process.

Our Top 5 Crypto Index is also on the verge of completing this major base.

Over longer timeframes, this price action is far from bearish.

Over the last month, we've argued that there's evidence Bitcoin could lead the altcoins.

We've seen this play out, but it looks like Bitcoin could be due for a rest relative to its counterparts.

Rotating Bitcoin profits into the coins showing relative strength makes sense right now:

Let's run through some of them.

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

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

In this post, we’ll do our best to 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 Steve Strazza @Sstrazza and Ian Culley @Ianculley

It’s no secret. 

As investors, we've been rewarded for buying stocks and commodities over bonds for more than a year now. And this will most likely remain the case, as more evidence suggests we’re in an environment that favors risk assets.

The copper/gold ratio hitting new seven-year highs, AUD/JPY testing its year-to-date highs, and cyclical stocks assuming leadership all point to an increasingly risk-on tone.

But for some of us, it’s not as simple as selling bonds and walking away. In some scenarios, we must have exposure to the bond market.

If that’s the case, we want to focus on the riskier areas of the market, just like we’re doing with other asset classes.

Let’s look at a few charts that direct our attention to the strongest areas of the bond market.

First, we have a chart of Inflation-Protected Securities...

From the desk of Willie Delwiche.

Key Takeaway: Sentiment remains neutral as bulls are on the rebound. Both II and AAII bulls ticked higher last week, and the 5-day put/call ratio dropped to levels indicating complacency. We may have seen the reset in optimism that was needed despite a lack of pessimism suggesting a complete unwind. With neither widespread fear nor clear evidence of sustained breadth improvement, the US is in limbo, challenging previous highs yet not confirming a breaking higher. Our suspicion is that a bout of disappointing news or earnings reports could quickly see nervousness and fear return. That could lead  investors to search for better opportunities where sentiment has shifted from optimism to pessimism and breadth is clearly improving (EM, anyone?).  

Sentiment Report Chart of the Week: Throwing In the Towel On EM

The latest BofA Fund Manager Survey shows that the widespread optimism on Emerging Markets that was present at the start of the year has turned to pessimism. Investors...

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

Most risk assets peaked during Q1 or May of this year and have consolidated in sideways ranges ever since.

But the bulls have started to take control of many of these trends. We're seeing more and more upside resolutions -- and this phenomenon isn't limited to Crude Oil, Rates, AUD/JPY, and cyclical stocks. Similar patterns are also playing out when we look at intermarket ratios, particularly those we use to measure risk appetite.

In today’s post, we'll dive into one of our favorite risk-appetite relationships and check for price confirmation in a variety of ratios.

First up is none other than large-cap consumer discretionary versus consumer staples stocks: 

JC already wrote about the breakout in XLY/XLP this week, which you can read here.

The bottom line is this breakout is bullish for the broader market. Stocks are likely moving higher across the...