From the desk of Willie Delwiche.

Key Takeaways:

• Yield curve flattening in anticipation of rate hikes
• Elevated inflation usually weighs on economic growth and financial market performance
• Markets have grown unaccustomed to global interest rate hikes

Federal Reserve policy is in a period of transition and this week’s FOMC meeting will provide some clarity as to the speed with which Powell is choosing to pivot. From beginning to taper the rate at which it has continued to expand its balance sheet, to accelerating the pace of that tapering process to actually raising interest rates (likely some time in 2022), pressure is building for the Fed to fight inflation with deeds, not just words. The yield on the 10-year T-Note continuing to move sideways suggests that either inflation, if not as transitory as some had hoped, is not yet as deeply embedded as some fear or in fighting inflation the Fed will derail a recovery that remains fragile. 2-year yields are pricing in action by the Fed sooner rather than later and the spread...

The simple fact of the matter is these last few weeks have been an environment of low liquidity where we've had little to no conviction in maintaining aggressive long crypto positions.

There's zero edge in trading right now, on either the long or the short side. Sitting out this messy price action is the prudent strategy, in our view.

Bitcoin is still below 53,000 and likely needs to contract and build out a base for at least another few weeks. We're more than happy to pay a higher price for an entry with greater conviction. This has been the case for the last two weeks, and there's nothing to provide updates on.

We talk a lot about relative strength around here.

"Which are the strongest stocks and sectors?"

"Buy high and sell higher!"

"What's on the new 52-week high list?"

"How many new highs are we seeing?"

These are all questions we're regularly asking. Like every day.

But at the same time, it's important to understand what's not working. And what are the implications of those things not working?

There are two main groups on my radar.

This is the video recording of the December 2021 Mid-month Conference Call.

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 money.

Then we flip through our list of stocks flashing unusual...

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest Under the Hood column where we'll cover all the action for the week ended December 10, 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...

From the desk of Willie Delwiche.

Key Takeaway: A surge to new highs can leave stocks out of breath. S&P 500 at an all-time high while more NYSE stocks make new lows than new highs. FOMC meeting likely to feature Fed grappling with surging inflation.

• The Technology sector remains at the top of our relative strength rankings. While mega-cap leadership is helpful, sector strength goes beyond that. It is the top-ranked sector from an equal-weight perspective as well as among small-cap sectors. This is also reflected in our industry group heat map, which shows strength out of the Hardware and Semiconductor groups across market cap levels.
• Consumer Staples saw a big jump in the rankings this week, and there is plenty of improvement within the Food & Staples Retailing and Household & Personal Products groups within the sector.

With the S&P 500 wrestling with the 4700 level, I've been turning my eyes to some of our more favorable bullish setups.

On Friday, the ASC team published their latest International Hall of Famers List report. This list is composed of the 50 largest US-listed international stocks or ADRs. The team takes the 50 largest names each week and then applies technical filters in a way that the strongest stocks with the most momentum rise to the top.

The name from this list that caught my attention just saw a dramatic collapse in options volatility, making call options cheaper. And with the stock above the trigger level, it's time for us to get involved.

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.

Struggling With Supply

When we zoom out and look at structural trends there are bases everywhere. This is true for all risk assets, not just stocks, and we’re seeing it on multiple timeframes. Some international indexes are consolidating beneath their dot-com bubble highs from over 20-years ago. Many others, like Emerging Markets and the MSCI World Ex-US index, are currently churning beneath their 2007 highs. Then there is crude oil and small-cap financials (shown in the chart), which are just some among the long list of charts that are still consolidating beneath their 2018 highs. This is a critical level because it is when risk peaked around the globe during the last cycle. Last but not least, there are a lot of stocks and commodities that are currently digesting last year's gains beneath their 2021 highs. The point is that risk assets are still dealing with a lot of overhead resistance, and this is true across...

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.

In last Monday's note, we outlined our multiple time frame approach in the aftermath of Bitcoin's liquidity crunch at the beginning of December.

The bottom line is we're in elevated cash positions looking for a higher-conviction entry.

The most probable outcome is that we see a contraction of volatility in Bitcoin while it ranges for the remainder of 2021. If this is the case, whipsaws are likely to be highly concentrated, and there'll be no edge in trading lower time frames or maintaining highly aggressive long positions.

But, as far as the structural picture is concerned, there's little to suggest that much damage has been inflicted on the HODLers, and spot flows continue to paint a bullish picture for 2022.

In today's report, we'll outline why this recent selloff doesn't have the characteristics leading to a deeper correction similar to what took place in May.

I saw this headline from CNBC last week:

"Sell-off in risky tech stocks feels a lot like the 2000 bubble and may not be over yet"

Meanwhile, here were Tech Stocks last week:

We're looking at Tech stocks relative to the Nasdaq.

Think about it, anything denominated in the Nasdaq is going to have a hard time going up.

But Technology finally is. And on a relative basis, it's still no where near those bubble highs.

This week we’re looking at a long set up in the Industrial Manufacturing sector. Stocks in this sector are performing well and are displaying strength.

Let's take a look at 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.

If there is anything that can get this market going it's the US Dollar.

And granted, the S&P500 did just close at a new all-time high. That did happen Friday.

But as we have documented relentlessly here, most stocks are not doing that.

The Average stock on the Nasdaq is down over 30% over the past few quarters.

Most Emerging Markets got destroyed. Chinese Internet is down 60%. Biotechs are crushed down almost 40%. The IPO Index killed. And ARKK Funds are down over 40%.

All is not well underneath the surface.

In fact, all of those sectors I mentioned peaked in February this year. That's when the Nasdaq New Highs list peaked and Nasdaq Advance-Decline lined also peaked.

Most importantly (potentially) is that was when Aussie Dollar peaked, and I don't...

The telecom sector has been in the doldrums for quite some time for multiple reasons. But we're seeing a revival in this sector and leadership has come through from the most unlikely contestant.

Read on to find out which stock we're talking about.

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 International Hall of Famers list is composed of the 50 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 50 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 when we want to. 

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 Steven Strazza @Sstrazza and Ian Culley @Ianculley

Despite taking a hit in recent weeks, commodities have remained resilient.

Buyers are working to absorb overhead supply at some key levels. We’re seeing this kind of action in commodities across the board -- from industrial and precious metals to energy and even agriculture. We’re seeing prolonged consolidations in some of the most important contracts, such as crude oil, copper, gold, and soybean oil. 

The point is simply that most commodities are correcting through either price or time. Some are digesting gains around former areas of resistance, and others have failed to sustain their breakouts. 

Regardless of where they came from, most commodities are stuck in a range right now. That’s critical information supporting our messy outlook for risk assets.

Despite the recent bout of selling pressure, the primary uptrend is intact. Even the weakest commodities (like thermal coal) are finding support. Lumber is bouncing back above its former 2018 highs and has actually been a leader...

From the desk of Willie Delwiche.

This idea came up in passing in our ASC+Plus weekly Townhall yesterday. The messy action in Copper looks a whole lot like the messy action in Berkshire Hathaway. After peaking in Q2 both have moved sideways. Copper has been more volatile than Berkshire, moving quickly to go nowhere. They are both up more than 20% for the year, but that has been true since late-April. It’s interesting that neither broke out to new highs in November and neither has (yet) broken down to new lows in December. When we get new highs or new lows from one or both of these bellwethers, we will definitely take notice. Until then it’s more sideways actions, with volatility in search of resolution.