From the Desk of Kimmy Sokoloff

That was a nice pop this morning, with $SPY trading as high as 404.

I put on a long position in SPY last night at 401. So it was a nice and very welcome good-morning gift.

From the Desk of Louis Sykes @haumicharts

One of the most remarkable philosophical pieces of all time is Plato's "The Allegory of the Cave." It's commonly applied in various ways in today's society, making it one of the most significant analogies to come out of the field.

The story follows a group of people chained underground as prisoners, only knowing the wall in front of them and nothing else.

Behind them is a fire, and between the prisoners and the fire is a walkway. As people move on the walkway, the prisoners see the shadows cast on the wall.

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

Today's Hot List is another short one.

The only 13G on our list was filed by Pura Vida Investments LLC, which revealed an initial stake of 5.62% in Quanterix Corporation $QTRX.

From the Desk of Kimmy Sokoloff

The market is back to happy mode.

$SPY is trading above 400, and all is well.

From the Desk of Kimmy Sokoloff

This morning $SPY broke below its 200-day moving average at 395.50 and then managed to come back above it.

It shrugged off $MSFT’s earnings report last night.

I call it the comeback kid! 

Chinese content? What?

Look, I don't know. I just follow Price. They are all just letters and numbers to me. If it trades, it's liquid, and there's a good technical setup -- that's all I need.

It just so happens that this particular company is engaged in creating Chinese internet content. Ok.

But man oh man do I like the potential reward-to-risk setup here so let's get straight to the point...

From the desk of Willie Delwiche.

The Investors Intelligence Bull-Bear Spread was unchanged last week, remaining just beneath the level that in the past has signaled  full embrace of equities and the opportunity for sustained stock market strength.    

Why It Matters: Excessive optimism can signal elevated risks for equities, but since 2015, virtually all of the net gains for the S&P 500 have come when II bulls have exceeded bears by 18% or more. For the past two weeks the spread has been stuck at 16.9%. The absence of bulls and a sustained re-building in optimism over the past year have been a headwind for stocks. The shift from excessive pessimism to elevated optimism is typically when stocks do their best, but this cycle investors have been slow to embrace rally attempts. With stocks strong out of the gate to start 2023, the lack of optimism is notable. If 2023 is not going to follow the path of 2022, investor attitudes about stocks will need to change. 

In this week’s Sentiment Report we take a closer look at...

From the Desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as "a market of stocks."

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions. But there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as The Hall of Famers, The Minor Leaguers, and The 2 to 100 Club.

We filter these universes for stocks with the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week via multiple reports.

Now, we're also highlighting lagging stocks on a recurring basis.

Welcome to the Short Report.

We publish this...

I hear ya.

You don't want boring words.

You want trade ideas!

We know we haven't published many over the last year. But this has been a purposeful decision.

Think about what's happened. People who forced old strategies in this bear market were culled.

This environment has been the polar opposite to the Solana summer. You can't buy random shitcoin breakouts and multi-bag trades within a few days.

It just hasn't been that kind of market.

But this is potentially changing.

It's the weekly currency edition of What the FICC?

If the US dollar index $DXY is going to catch higher, it has a funny way of showing it. I haven't ruled out a bout of dollar strength.

Nevertheless, I'm preparing to play USD weakness.

Check it out!

The Dollar was the catalyst all along.

She was always the one.

The strong negative correlation between stocks and the US Dollar has been consistent since 2016.

When the Dollar is weak, stocks rip. End of story.

Look at how well stocks did in the 4th quarter while the US Dollar Index had its first 3 straight months of losses since the end of Covid, which if you recall sparked the greatest 52-week period for returns in the history of the stock market.

I still think it's important to focus on the Dollar, so here are some potential levels of future interest:

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

This week we're looking at the stock from the Metal sector.

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 largest insider buy on today's list is a Form 4 filing by RA Capital Management.

The hedge fund reported a purchase of roughly $25 million in Fulcrum Therapeutics Inc $FULC, increasing its ownership stake to 23.8%.

From the Desk of Kimmy Sokoloff

$MSFT reported last night, and, at first, it rallied above $250. And then management had their conference call.

We'll see how it acts, if dip-buyers show up or it just heads back down to $226.

Vega risk is real.

— Sean McLaughlin, NLD 📈 (@chicagosean) January 24, 2023

I tweeted that earlier today as I was feeling my position value decay away for no conceivable reason as the market was coasting sideways.

I felt helpless as my index options position was melting away, far beyond the level my theta risk suggested it would in a quiet market.

It turns out, the quiet market was precisely the reason.

It was a stark reminder to me: Long Vega also entails risks that I need to be aware of.

Most people, myself included, tend to worry about getting caught short volatility (short vega) in a market environment where volatility is rapidly rising. We’ve all heard the stories of traders holding naked short options that were overleveraged into a volatility spike. Those stories make the headlines. And rightfully so.

So it’s easy to forget that being long volatility can be just as painful when volatility is grinding lower as VIX certainly was today:

From the Desk of Ian Culley @IanCulley

I haven’t ruled out a US dollar bounce. 

But it seems less likely with each passing day.

Other major global currencies are regaining lost ground following a year dominated by dollar strength. It shows in the US Dollar Index $DXY as it continues to slide back within its prior multi-year range. 

Lower lows for the DXY will not instill confidence in dollar bulls. Meanwhile, savvy investors should take its performance as a signal to buy other currencies.  

Here are two of my favorite setups from the forex markets…

Check out the GBP/USD pair on the verge of completing a multi-month reversal formation:

This chart has the hallmarks of a classic inverted head and shoulders with a neckline at 1.2425 (the Dec. 14 close). That’s our risk...