From the desk of Steve Strazza @sstrazza

This is one of our favorite bottoms-up scans: Follow The Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.

We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients. Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.

We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty...

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest "Under The Hood" column for the week ended July 9, 2021. This report is published bi-weekly and rotated on-and-off with our "Minor Leaguers" column.

What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.

We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.

Watch this video for a "behind the scenes" look at our process.

Whether we're measuring increasing interest based on large institutional purchases, unusual options activity, or simply our...

Key Takeaway: Index-level strength lacks support beneath the surface. Economic surprise index dips below zero. The earnings revision trend is higher though the pace of ascent is slowing.

• Real Estate moved into the top spot in our rankings. It was one of four large-cap sectors to make new 52-week highs last week (the others were Consumer Discretionary, Health Care & Technology). No small-cap or mid-cap sectors made even 13-week highs.
• Financials have been short-term & mid-term laggards, with deteriorating conditions in Banks across market cap levels weighing on the sector.

JC put a post up today taking a look at the Semiconductor sector. As a group, the sector is looking poised for a breakout and he goes into some of the even better looking charts for individual names that make up the sector index. Give it a read.

His favorite idea from the group is one that I can get behind, especially in light of the price action over the past two days. It feels like now is the time to get involved.

From the desk of Steve Strazza @Sstrazza

Check out this week’s Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the context of the big picture and provides insights regarding the structural trends at play.

Let’s jump right into it with some of the major takeaways from this week’s report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

• Another flat week for our macro universe as only 51% of our list closed higher with a median return of 0.03%.
• The Volatility Index $VIX was this week’s big winner with a 7.37% gain.
• Lumber continues to decline and was this week’s biggest loser dropping -7.16%.
• Dow Jones Industrials $DJI, Nasdaq Composite $COMPX, and the Russell 3000 $IWV all printed bullish reversals this week.
• ...

From the desk of Steve Strazza @Sstrazza

Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Last week we discussed the underperformance of European banks and the potential implications in the near term for risk-taking behavior.

This week, these suspicions were confirmed when price fell back below a key level, confirming a failed breakout. Similarly, the MSCI United Kingdom ETF, one of the most important economies within Europe, was unable to break above a significant resistance level around 34. Now, both are trapped below overhead supply.

If European financials and UK stocks are trapped below their pre-covid highs, it’s consistent with an environment where markets remain messier for longer and risk assets are vulnerable.

Technical analysts often say, "From compression comes expansion."

In other words, as markets become more coiled, buyers or sellers are ultimately forced to front up. This period of shrinking volatility is often met with violent unwinds - in either direction.

So when we see these periods of notable reductions in volatility, pay attention because the resolution often sets the tone for weeks and months to come.

Just take a look at how tight the Bollinger Bands have become in Bitcoin:

Through this measure, volatility is at its lowest point since October last year...

From the desk of Willie Delwiche.

A DYNAMIC APPROACH TO PORTFOLIO MANAGEMENT

The number one question I have gotten from financial advisors over the course of two-plus decades in this business is “What should I do now?” The answer can sometimes be “nothing”, but it cannot always be “nothing”. Dynamic portfolio management is about finding the right balance between following existing trends and adjusting as necessary to new information. To do this we need to have a good grasp of time frames. Every investor has a timeframe. Every system has a timeframe. Finding harmony between the two helps provide the appropriate balance between action and inaction.

We can think about this in terms of navigation and one of my favorite investing metaphors: sailing. We wouldn’t want to go on a journey with a captain who fiddles with the rigging so much that he cannot hold the wind. We also wouldn’t want to go sailing with one who doesn’t even try to catch the wind in the first place. We want to go sailing with a captain who observes where the wind is actually blowing and positions the boat accordingly. Even once the wind fills the sails and there is...

Technical Analysis is an art. It's not an exact science.

Sure, we use a lot of computers and math as inputs to help piece together the overall puzzle. But it's the interpretation of all that data that represents the art form.

That's how I see it anyway.

And so we always like argue both sides and see which one has the highest probability of occurring.

How else can one properly have an unbiased view?

So here's one look at the Semiconductor Index:

This week we're looking for a long setup in the Industrial Manufacturing sector. We shared a few ideas in our recently concluded Monthly strategy call as well. But here's another name that's looking good!

Let's see what we have today.

We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

It's Saturday Morning Chartoons time. 

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

What are these falling rates suggesting for the rest of this summer?

I think this one tells an interesting story. I believe there are implications here for small-caps.

An upside resolution in $IWM likely means rates have found a floor:

But they still have some work to do. 

We discussed all of this and everything else on the latest Quarterly Playbook. You can download that here.

Also make sure to check out this week's Saturday Morning Chartoons. These are my favorite!

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

Overhead supply is a theme we're seeing all over these days. And this isn't just true for the stock market, but it's also dominating the commodity landscape.

Crude Oil reached our objective of 76 and turned lower. Copper remains stuck below its former 2011 highs. And Gold has been an absolute mess since peaking last August.

Even the few commodities that have recently broken above resistance zones -- such as Gasoline and Heating Oil -- have yet to follow through and confirm their new highs in any meaningful way.

Remember, commodities have enjoyed some explosive moves over the past year. Now, many are at logical levels to pause and digest recent gains. This is healthy stuff. Normal market behavior.

And when we consider the recent...

This is our ASC Research Q3 2021 Playbook.

With the current market environment giving us many mixed messages, what better time to dive in and see what's happening underneath the surface?

• Stocks (International & U.S.)
• U.S. Sectors & Industries
• Market Breadth & Sentiment
• Commodities
• Currencies
• Intermarket Analysis
• Crypto Currencies
• New Trade Ideas
• Overall Strategy

We've also made it really easy to navigate through this 242 page report by organizing the tabs for you. So be sure to open the PDF and use these tools to make your life easier.

Enjoy!
 

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Our apologies for the late delivery as we've all been so buried in charts preparing our Q3 Playbook that we forgot about this week's column!

As many of you know, something we’ve been working on internally is using various 'bottoms-up' tools and scans to complement our top-down approach.

One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small, to mid, to large - and ultimately 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...

From the desk of Willie Delwiche.

I might be old school, but I like to look within the Financials sector for leadership trends that provide some clues for the path of the market overall. Specifically, I keep an eye on what Banks and Broker/Dealers are doing on an absolute basis but also relative to the S&P 500. The XBD bottomed versus the S&P 500 early last year and led the rally into Q1 2021. The BKX began leading a bit later, but its relative strength carried further into this year. Both now have rolled over and are moving lower versus the S&P 500. As we have shown recently, the XBD/SPX ratio tends to move with our risk on/risk off ratio and so a breakdown in the Broker/Dealer index may be a warning signal about the overall risk backdrop.

This is the video recording of our July 9th, 2021 All Star Charts Crypto Weekly Strategy Session.

When there aren't any bears left, the market has a funny way of creating new ones.

That's been one of the biggest questions from me over the past few weeks. Where did all the bears go?

Meanwhile, which asset class have investors been piling into the most this year?

This is the video recording of the July 8th Town Hall Meeting w/ Willie Delwiche & JC Parets

07/08/21 2PM ET