From the desk of Willie Delwiche.

Key Takeaways:

• China weakness has meant moving away from EEM for Emerging Market Exposure
• New highs from Taiwan could point to improving trends for China and EEM
• Canada benefitting from exposure to Energy & Financials

Emerging markets have been dealing with the opposite problem that we have discussed in the US. In the US, mega-cap strength has supported the indexes as conditions beneath the surface struggled. In Emerging Markets, mega-cap weakness (China accounts for nearly 22% of EEM) has weighed on the indexes as conditions beneath the surface improved. The goal of this piece is to help discuss how we will know if and when that condition changes. 

Given the struggle at the top of the index, we have been utilizing India, Russia, and Saudi Arabia (which together account for 19% of EEM) for Emerging Market exposure. All three of these (as well as FM, Frontier Markets) have made frequent appearances on our new high lists.

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For the most part, traditional markets have been a fat mess for the better part of this year.

That's why crypto has caught our attention so much in recent months: It's stood out as a beacon of alpha.

Whether or not you've been invested in crypto, chances are you've probably heard all the chatter about Solana - and for good reason. It gained a whopping 700% from its July lows in just under two months, making it one of our best trades of the year.

But, when you dive down the cap scale, there are so many opportunities shaping out just like how Solana was a few months ago.

Harmony is one of them:

We've been long Harmony on this breakout above 20 cents, and so far it's treated us very well, with prices are running up against our first upside target of 33 cents.

It seems to have a great fundamental use case, bridging together a variety of smart contract platforms and essentially making...

The last couple of weeks have been quite a ride in the market.

If you've been following actively, then you probably saw the selling pressure come through in several sectors. As sectors rotate within the existing bull market, strengths and weaknesses will keep shifting hands.

Today we're here to take a look at the weak areas of the market and the levels they'd have to move past, to get out of that weakness.

From the desk of Steve Strazza @sstrazza

This is one of our favorite bottom-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 penny...

From the desk of Steve Strazza @Sstrazza

Welcome to our latest “Minor Leaguers” report.

We’ve already had some great trades come out of this small-cap-focused column since we began rotating it with our flagship bottom-up scan “Under The Hood” earlier this year.

We recently decided to expand our universe to include some mid-caps… 

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but we think it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B. And it doesn’t have to be a Russell component–it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe. 

The...

From the desk of Willie Delwiche.

Key Takeaway: Mid-caps lead the way as new highs lists expand. Breadth heading in a positive direction but still has work to do. Market rewarding stocks that beat earnings expectations, punishing those that miss.  

• The Energy and Financials sectors continue to be areas of strength on both a relative and absolute basis. They are the top ranked sectors in our relative strength work and finished last week at news highs. 
• Real Estate has rebounded in relative strength and is in the third spot overall. At the small-cap and mid-cap level, Real Estate finished at new highs last week. 
• Consumer Staples, Utilities, and Health Care remain the weakest sectors. 

All-time highs can be messy, and many times, the breakout comes after the shakeout.

So will it be like this?

Considering the accumulation taking place by long-term spot investors on-chain, it's certainly looking that way.

Yesterday we saw a notable outflow out of exchanges as investors continue to scoop coins off exchanges and into cold storage to HODL.

Not bearish.

So if and when Bitcoin resolves higher back above 65k, we'll be positioned aggressively long both Bitcoin and in quality alts.

We're talking Ethereum, Solana, Harmony, Avalanche, FTX, Algorand, and Elrond, among a few others.

There's likely to be a ton of alpha in those names in the...

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts 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.

Looking For Confirmation

Many markets and major indexes have pressed back to their year-to-date highs in recent weeks. How price reacts at these natural levels of overhead supply will be the next key piece of information we have. We’ve already seen a handful of leadership groups like Financials and Energy reclaim these resistance zones. Meanwhile, many major indexes like the S&P rallied back to their highs last week and paused. One thing worth noting is that momentum has been waning and making lower highs despite the higher highs from price since April. An overbought RSI-14 reading would go a long way in confirming new highs at the index level.

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 big picture context 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.

• Our macro universe was positive across the board again this week as 70% of our list closed higher with a median return of 0.64%.
• The US 10-Year Yield $TNX was the big winner, closing out the week with more than a 5% gain and fresh 13-week highs.
• Once again, the biggest loser was Lumber $LB with a weekly loss of -12.15%
• There was no change in the percentage of assets on our list within 5% of their 52-week highs - currently at 66...

(While on vacation until Oct 26th, I’m going to be sharing some anecdotes on my favorite trading strategies: why I use them, when, and how I manage them once they are on.)

A Vertical Spread is one where you are long options at one strike and short an equal amount of options at another strike, both in the same expiration series. These can be done both for debits or credits, depending on whether you purchased the more expensive option (debit) or sold short the more expensive option (credit). And these can be done with either all calls or all puts.

But my favorite version of the vertical spread is a Bull Call Spread, where I purchase an at- or slightly out-the-money call and sell a further out-of-the-money call against it to lower my net purchase price.

This week we’re looking at a long setup in the Services sector. With the move in the week gone by, there are only a few pockets of strength to track. And this is one of them.

Let's take a look at this stock.

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.

Over many years of doing this I've observed a few things.

One of them that stands out is how much more time investors spend focused on how much money they're going to make, and less time on what the market needs to do to prove them wrong.

You see, I don't care how high you think the stock goes. I want to know what the market would need to do to prove your thesis invalid.

That's way more important.

Any idiot can buy a stock that goes up. It's what you do with the stocks that don't do what you think they're going to do that separates the winners from the losers.

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.

You can find the whole list of trades here.

Below you'll find the full PDF of this week's charts:

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 100 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.

The Hall of Famers is simple.

We take our list of 100 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

And here’s how we arrived at it:

• Filter out any stocks that are below their May 10 high, as this is when new...

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

It’s been impossible to ignore the strength in commodities this year.

The CRB Index is up more than 50% over the trailing 52 weeks. During this same period, the S&P 500 is up 32%, and bonds ($TLT) are down more than 8%.

Commodities are the clear leaders.

With breakouts from some of the most commonly observed contracts -- crude oil, copper, and natural gas -- more investors are coming around to the idea that commodities are a viable asset class.

Now that the buzz surrounding this once-forgotten corner of the market is growing, we’re seeing many commodities run into overhead supply zones. We think it would make sense for these contracts to consolidate here. Following such explosive moves off last year’s lows, some sideways action at resistance would be normal behavior.

Let’s look at a few charts that are at logical levels to digest gains.

First up is natural gas futures:

This has been a face-ripper, rallying more...

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.”

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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.