From the Desk of Ian Culley @IanCulley

The US dollar Index $DXY is trading at fresh highs. Take a look around the currency market. It shows.

Recent attempts to fade dollar strength have failed. The euro has fallen to its lowest level since late 2002. And we’re beginning to see forex pairs experience fresh breakouts in favor of the USD.

It’s certainly not the best look for risk assets. But it’s offering us great trading opportunities, not to mention some very valuable information.

A couple of pairs that are providing both are the USD/CNH and the USD/CNY. Let’s take a look!

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.

From the Desk of Steve Strazza @Sstrazza.

Welcome back to Under the Hood, where we'll cover all the action for the week ended August 19, 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.

The market has set the stage.

From a seasonal perspective, the back half of the year should be strong.

When you consider the bearish sentiment readings we're coming off of this summer, a massive shift in sentiment into year end makes perfect sense.

We've seen the breadth improvement, as we get more and more stocks making new short-term highs, and now sector rotation has started to kick in.

SO WHAT'S THE CATALYST?

Is Ethereum going to be worth more than Bitcoin one day?

Yea probably.

I think so.

And remember, I really don't care either way. I would just like to be on the right side of the trend, that's all.

In this world of crypto, especially in Bitcoin and Ethereum, people are very passionate about their opinions.

At Allstarcharts we are not.

All I know is that Bitcoin is now worth around $400B in market cap while Ethereum is closer to $200B. So ETH has some work to do.

And when I look down at this base, in my experience, this is precisely the work that it's needed to be doing...

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.

From the Desk of Steven Strazza @Sstrazza

Stocks have enjoyed a powerful rally off their summer lows, as bulls have been in control for about two months now.

A lot of technical damage has been repaired during this time. 

The outlook from sentiment and seasonality assure us the environment is ripe for a bottom. 

Breadth thrusts are stacking up and suggesting we could be in the early stages of a new bull market.

And risk appetite is gradually reentering the market, supporting the bullish price action.

Today, we'll review one of our favorite intermarket relationships, the discretionary versus staples ratio. 

By comparing these two consumer segments, we garner valuable insights about the current market environment and risk appetite in particular.

Here's the large-cap Consumer Discretionary $XLY versus Consumer Staples $XLP ratio:

From the Desk of Ian Culley @IanCulley

Markets constantly provide valuable information. But it’s up to us to listen.

Of course, it’s easy to get caught in a narrative or bias surrounding a particular market. It’s part of the human condition.

And it’s almost a prerequisite. 

In order to step up to the line and assume risk, we need to have a certain level of conviction. At the same time, we must remain open-minded and flexible, willing to receive new information and update our priors.

It’s a balancing act.

And energy is one area of the commodity market that’s keeping us on our toes.

Heading into Q3, we were looking for energy to follow the vast majority of other commodities lower, including base and industrial metals.

So far, that hasn’t been the case. 

The chart below highlights how closely the two procyclical commodities groups have trailed each other heading into 2022:

From the desk of Steve Strazza @Sstrazza

Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs. We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut. 

These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.

It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.

The beauty of these scans is really in their simplicity.

We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.

Based on the market environment, we can also flip the scan on its head and filter for weakness.

Let’s dive in and take a look at some of the most important stocks from around the world.

Here’s this week’s list:

From the Desk of  Ian Culley @Ianculley

The market environment has been shifting in favor of the bulls all summer.

Breadth thrusts are firing as participation beneath the surface expands. Risk assets – commodities and stocks alike – are reclaiming critical levels of former support.

And our bull market rebirth checklist is triggering four out of five criteria.

This is a huge departure from earlier in the year.

But one aspect of the environment remains the same – interest rates. Yes, rates have come off their June peak. And, yes, US yields have paused at a logical level marked by a series of former highs.

That’s all true, and it all makes perfect sense.

But we still find ourselves in a rising-rate market as the underlying uptrend remains intact – for now.

Earlier in the month, we broke down the ranges in the 30-, 10-, and 5-year US yields. Today, we'll turn our attention overseas.

We never actually know that we've been in a bull market until well after the bottom.

It's easy to look back and pinpoint the March 2020 low or the March 2009 low, for example, and say, "That's when the bear market ended and a new bull market started".

But in real time, when we're going through that transition, how can we possibly know?

Well, classic signs of the end of the bear markets are things like historically bearish sentiment extremes and washout breadth levels.

We obviously had both of those as our sentiment readings this summer were the most pessimistic since the Great Financial Crisis, and only 14% of stocks on the NYSE were in uptrends (compared to almost 90% entering 2021).

Those are the things you see just before the market turns.

Now, what are the things you see just after a market turn, around the 2nd inning or so?

Momentum thrusts.

Relentless buying pressure coming off historic selling. And that's precisely what we've been seeing over the past month.

From the Desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

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, to 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.