From the desk of Willie Delwiche.

Over the past year, this old Wall Street saying has been more than an adage. It’s been a reality. Correlations across the ETFs that we use as proxies for various asset classes are overwhelmingly positive and on the rise. The exception has been Commodities (DBC), though many asset allocation conversations don’t even include commodities.   

Why It Matters: Elevated correlations have left investors with no places to hide as stocks enduring historic levels of volatility and weakness. 2022 has been a risk off environment where risk off assets have been as weak as risk on assets. Trying to navigate this backdrop has led to frayed nerves and impatience for the arrival of better times. Unfortunately this year has done little to show it deserves the benefit of the doubt so far.   

In taking a Deeper Look we put 2022 into context, review our indicators of risk behavior and highlight some areas where risk appetite may be improving.

We've adjusted a position in the Paid-to-Play portfolio today:

The Dow Jones Industrial Average is working on its 3rd straight week of gains.

In case you missed it, you have to see the look on Maria Bartiromo's face after I told her Friday that we're 4 months into a new bull market.

Priceless.

I think she was into it though. Check out the full clip on Fox Business here: Mornings with Maria

This weekend I published a note about how underrated I find the Dow Jones...

You hear it every day.

Are you bullish or bearish?

Like, what does that question even mean?

Which asset class are we talking about?

What time frame?

What sector?

It's a question that only journalists should ask. People with skin in the game understand that strong opinions will always be weakly held when money is on the line.

Our opinion never matters. What does matter is how we adapt our approach as new evidence comes in that either corroborates or contradicts our initial thesis.

From the Desk of Kimmy Sokoloff

That was a huge move overnight in the futures market. We're currently trading above gap-fill on the SPX at 3,739.

Now, let's see if we back and fill some.

The largest insider transaction on today’s Hot List is a Form 4 filing by Nimish P. Shah.

Shah reported an additional purchase of Tricida $TCDA stock worth roughly $2 million.

We retired our "Five Bull Market Barometers" in 2020 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.

The stock that has made its way to the ToW post this time around is from Bank Nifty. Slowly but surely, more and more constituents are moving higher and breaking out of big bases. Let's take a look at one such name.

From the Desk of Steve Strazza @Sstrazza.

Welcome to Under the Hood, where we'll cover all the action for the week ending October 14, 2022. This report is published bi-weekly and rotated with The Minor Leaguers.

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.

Click here for a behind-the-scenes look at our process.

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

From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @AlfCharts

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...

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.

Bonds Lead

First bonds, then stocks, and now commodities have rolled over, following the traditional intermarket cycle. If the pattern holds, we should expect bonds to bottom first and eventually lead the way higher. With yields on the rise, there are no signs of this yet, but even a transition to a sideways trend could bring some stability to other asset classes.

From the Desk of Kimmy Sokoloff

That was a nice range-bound day for the market overall. The consolidation is healthy.

Taking Out The COVID Lows

US industry group trends are at a new low for the year and are approaching washed out levels. Take out the Energy groups and virtually nothing is in an up-trend.  

The Details: The industry group trend indicator looks at 4 weekly trend metrics for each of the 72 industry groups in the S&P 1500 (24 each for small-caps, mid-caps and large-caps). The higher the number, the broader the strength at the industry group level.  

More Context: From an industry group trend perspective, this is as bad as it got during COVID and during the bursting of the Tech Bubble. It was worse than this during the Financial Crisis (both during October 2008, which was not the low and March 2009, which was the low). We cannot know how bad it will get this time and so rather than anticipating a turn higher and improving conditions, I would rather wait for evidence of a turn and follow the trend higher.    

We take a Deeper Look at what would give us confidence...

Our Ian Culley said it best:

Don’t catch falling knives!

It sounds simple enough. But in reality, traders continue to lose fingers as they reach for downtrending assets.

It's true in stocks, it's true in commodities, and it's true in bonds. It's true in any asset class, really.

And the knives keep falling left and right. Let's avoid getting our hands cut and let's just go with the trend, shall we?

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.

Macro Universe:

• Our macro universe was negative this week as 77% of our list was lower for a median return of -1.07%.
• Lumber $LB was the winner, closing with a 10.86% gain.
• The biggest loser was Silver $SI, with a weekly loss of -10.78%.
• There was a 3% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 9%.
• Only 11% of our macro list made fresh 4-week highs.
• Meanwhile, 47% of our...

The next new position in our Paid-to-Play portfolio is:

I don't know how you were taught to approach markets.

But I still have Ralph Acampora in my head. I can still hear him yelling, "Don't Fight Papa Dow!!"

He's referring, of course, to the Dow Jones Industrial Average, and respecting the direction of its trend, and its components.

We just saw back to back positive weeks for the Dow Industrials for only the 4th time in 2022. See here.

This weekend I published a note about how underrated I find the Dow Jones Industrial Average to be among traders and investors.

Not sure why people get so upset about the Dow. I find it really valuable and shared some of my favorite hacks here.

The Dow is not something I want to fight. In fact, I was specifically taught not to.

So here's what this looks like. You can see the Pre-Covid highs that were taken out in Q4 2020. And now here we are, back to the scene of the crime.

...

There have been no developments since last Monday, so today's note will be a brief interim update.

From the Desk of Kimmy Sokoloff

Overnight, the futures held Friday's lows, and now we're back up against resistance.

Not too many names stand out to me right now, I think maybe because they just keep going back and forth.

In a busy morning for oil and gas deals, Continental Resources $CLR announced a merger agreement with the company founder and billionaire Harold Hamm.

Over the weekend, Hamm boosted his original offer from this summer to purchase the existing $4.3 billion worth of shares that he and his family do not already own for $74.28 per share.

Friday morning I was in the city chopping it up with Maria Bartiromo.

She was surprised at what I had to say.

But I think she was intrigued.

Also, huge shoutout to Fox Business on their 15th Anniversary. It's been amazing to watch them continue to dominate financial TV.

Congrats all around.

Check out the full clip from Friday morning: