May Mid-Month Conference Call: 5 Key Takeaways

From the desk of Steve Strazza @Sstrazza

Last week, we held our April Monthly Conference Call, which Premium Members can access and rewatch 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!

1. New Highs Happen in Bull Markets

After some corrective action in April, most major equity benchmarks are printing fresh all-time highs again.

The Russell 3000 $IWV represents approximately 98% of all investable assets in the U.S. equities market, making it one of the broadest indexes available. Seeing IWV roar back to record highs can only be viewed as a bullish development for the overall market:

Stocks have primarily been churning sideways this year, but the evidence suggests they are kicking off a new leg higher. As long as we’re above the prior-cycle highs in the major indexes, the risk is to the upside.

We want to bet on higher stock prices into the end of the year and position ourselves in risk-on stocks that are showing leadership. 

2. Green Light from Sentiment

Sentiment has been a significant headwind for risk assets this year as investors grew complacent following the gains from 2023.

Today, sentiment has dramatically shifted and is becoming a tailwind. Below, we’ve highlighted our Sentiment Composite trending toward the opportunity zone:

While we need bulls for a bull market, too much optimism is not conducive to a sustainable rally.

Negative or pessimistic sentiment tells us there are still future buyers on the sidelines. This incremental demand will help drive prices higher.

3. Europe Has Arrived

We’re seeing broad strength from equities across the globe.

Below we’ve highlighted the STOXX Europe 600 Index making new all-time highs after retesting the breakout level of a multi-decade basing pattern:

As shown in the lower right-hand corner of the chart, this index is diversified with significant exposure to a variety of sectors. Notice that technology is the fifth largest component, making it very different from most US indexes. 

New highs and a monster base breakout for the STOXX Europe 600 is just one way to illustrate the expansion in participation we’re observing around the world.

4. Financials Fly Higher

Financials are considered one of the most important sectors in the world as they provide excellent information about the risk-seeking behavior of investors.

Below, we have the MSCI Europe Financials ETF $EUFN reaching new multi-year highs:

As you can see, after breaking out from a multi-year base, price pulled back to former resistance and successfully rebounded from there.

As long as investors are buying offensive groups like financials, we’re likely in an environment where the rest of the market is doing well.

5. Intermarket Catalysts

As bond yields and the dollar have weakened, we’ve seen stocks participate to the upside in unison.

Below, we’ve highlighted the U.S. 10-year Yield and the U.S. Dollar Index potentially rolling over:

If these two lines continue to trend lower, we expect a significant increase in risk appetite across the board. 

We’re looking for downside follow-through to confirm that a short-term top has been made.

As always, Premium Members can rewatch the Conference Call and view the slides here!

We hope you enjoyed our recap of this month’s call. Thanks for reading, and please reach out to us with any questions!

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