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...

It's a new year!

Are you ready to crush it?

I am.

But it seems investors are coming in skeptical of what 2022 might bring.

As we've already mentioned, the data points to investors being much much more bearish coming into 2022 than they were going into 2021 or 2020, where they were incredibly bullish and optimistic going into those years.

But as we know all too well, stocks peaked in February of both those years, on an absolute basis in 2020 before the COVID crash, and internally in 2021 when many stocks started their declines.

This has been a common theme so far in my year-end analysis: using the words "New Highs" much more than usual.

Premium Members can download our Monthly Chartbook here.

Take a look at a broad measure of European stocks coming out of a 20-year base and now making new all-time highs.

The data is in.

2021 is in the books.

And it was a good one for most risk assets. Although the majority of stocks had their struggles at some point throughout the year, sector rotation continued to drive index prices higher. And it wasn't just stocks, risk assets in general had one for the record books.

The Average stock in the S&P500 was up 27.6% in 2021.

The Median S&P500 stock returned 25.2% for the year.

It was a big year for Crypto, Web 3.0, the Metaverse and all things Blockchain.

In case you didn't hear, a lot of people made a lot of money. And "a lot" is probably understating it.

How'd you do?

Either way, win lose or draw in 2021, we're looking forward to 2022. But in order to do so responsibly, it's important to know where we've come from.

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 Steven Strazza @Sstrazza and Ian Culley @Ianculley

In recent weeks, we’ve been diving into individual commodity groups to size up the structural trend and to get a better idea of where we’re likely headed in the new year.

Last week, we highlighted energy contracts and the fact that many are still grappling with overhead supply. And earlier in the month we covered the worst-performing area of the commodity markets - precious metals.

Today, we’re going to turn our attention back to metals and review the base metals group.

Even with the S&P 500 printing record highs, trading ranges and overhead supply stole the show in 2021 and those dominant themes are evident when we look at base metals.

Notice the strong relationship between our equal-weight base metals index and blue-chip international equities in the Global Dow Index $DGT.

From the desk of Steve Strazza @Sstrazza

Yesterday, we wrote a post about scanning for new lows, putting our own spin on a strategy called "Wall Street's only free lunch."

I was joking with JC that it felt a bit uncomfortable to search through such a weak list of stocks. After all, we’re used to scanning for strength.

But the scan was a fun exercise, and we found some weakness we want to be buying in secular leaders. 

The universe wasn’t exactly full of strong stocks, as we were scanning for new 52-week lows. But that’s OK; we have plenty others for that.

In this post, we’re going to walk through another scan we did internally this week. Unlike the "free lunch," this one is more in line with our top-down approach of finding the strongest stocks in the strongest groups.

While we're still scanning for new lows, we’re doing so on a much shorter time frame, and we're adding additional filters to ensure all the stocks on our list are leaders.

We like to tailor our scan parameters to the market environment. As such, we’re always changing it up...

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 10th high, which is when new 52-week highs...

Our friends over at Stockcharts.com asked me to put together a short video on the most important theme of 2021.

For me, it's hard to ignore how breadth deterioration throughout the most the year impacted sentiment. This summer, the extreme levels of bullishness among individual investors and financial advisors became a headwind for stocks.

After the prices of those stocks deteriorated further into the Fall, that sentiment flipped to the opposite extreme. We came into December 2021 with the most bears in over a year and fewest bulls since April 2020.

As we enter 2022, sentiment is very different than how things looked entering 2020 and 2021.

By my work...

From the desk of Steve Strazza @Sstrazza

"There's no such thing as a free lunch."

Many of you are already familiar with this popular market adage as it is a commonly used quip in our industry.

All it really means is that you can't get something for nothing from the market.

Have you ever bought a high-yielding stock for the dividend and rode it into a big drawdown just for them to announce they're cutting the payout?

Did you listen to a friend about a biotech stock that was supposed to rip higher on positive FDA results... but it actually gapped lower?

How about following the analyst community into a stock that was a consensus buy... until it turned out not to be?

In all of these scenarios, the investor is simply looking for a free lunch. And 9 times out of 10, these situations don't work out. There are no easy investments or get-rich-quick tricks on wall street. At least not sustainable ones. You have to put in the work.

One rule that I live by for my own investing is this: "If it seems too good to be true, it probably is."

I've learned first-hand to run from investment opportunities that don't...

Some stocks are just built different.

Right now it's hard to ignore how the bond market is impacting certain stocks, and which ones of those are already ahead of the game.

You see in December, we've seen credit spreads narrowing to levels not seen since the pandemic crash in 2020. The Yield curve has been steepening as well. And rates in general, particularly the 10yr and 30yr held their key levels and started moving higher.

To me, all of this screams higher for bank stocks. But it's not a one size fits all scenario. There are leaders.

And I can't help but point out Customers Bancorp. This $2B Regional Bank stock has continued to make new all-time highs, despite the industry under pressure over the past couple of months.