From the desk of Willie Delwiche.

Fighting inflation is job number one for the Fed right now. Jerome Powell made that crystal clear in his remarks from Jackson Hole on Friday. He discussed the deleterious effects of inflation and the risks that come with prematurely claiming victory (and loosening policy). This could lead to more persistence in raising rates, more tolerance of economic weakness, and more willingness to keep rates high for an extended period of time. In this environment, inflation data will be scrutinized more than ever. While inflation expectations get a lot of focus, they are much more closely related to where inflation has been than where it is going. There is an 85% correlation between 5-year CPI inflation and current 5-year inflation expectations. That drops to just 26% when inflation expectations are moved ahead 5 years (so that the inflation data and expectations data are covering the same time period).  If inflation stays high, expectations will become further unanchored. Alternative measures of inflation (like the median CPI from the Cleveland Fed and the trimmed-mean PCE from the Dallas Fed) show that the central tendency for inflation...

"Jackson Hole" has delivered volatility once again. Seems we can always expect fireworks when the bigwigs gather at a luxury resort in the mountains. Must be nice...

We're going to take advantage of some of this volatility by positioning into a delta-neutral credit spread in the highest implied volatility ETF currently on the board.

Let's get to it.

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

This is the video recording of our August 26, 2022, All Star Charts Crypto Weekly Strategy Session.

The largest insider transaction on today's list is a Form 4 filing by Cevian Capital.

Cevian reported an $11.4 million purchase in Autoliv $ALV, the world’s biggest manufacturer of airbags and seatbelts for cars.

Have you taken a look at the new 52-week high list lately?

You're going to find a bunch of materials starting to pop up.

Here are 3 monsters who are helping to lead the way:

From the Desk of Ian Culley @Ianculley

Identifying trends is one of the most important jobs of a market technician. Regardless of our time horizon, we have to understand the general direction the market is taking.

It sounds simple, but it’s the foundation of any market thesis.

Once we have the underlying trend nailed down, we can focus on the areas of the market we want to exploit and pinpoint the best tools and strategies to do so.

When I think of the most critical trends to date, my mind immediately goes to interest rates. Rising rates and inflation have been the key drivers for two years now.

Despite some corrective action in recent months, the bond market has been reminding us that we’re still in a rising-rate environment.

Let’s take a look.

First, we have an overlay chart of the US 10-year breakeven inflation rate and the US 10-year yield:

As you would...

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 that are exhibiting 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.

From the desk of Willie Delwiche.

During our “Trendlines over Headlines” conversation last week, Patrick Dunuwila and I spent some time discussing seasonal patterns in the stock market. Among the inputs to our cycle composite is the 4-year Presidential Election cycle. The tendency for stocks to make a pre-midterm election low and then see sustained strength in the year between midterms and the Presidential election is well-advertised. The stats around this are pretty amazing. On average, stocks bottomed two months prior to the midterm election and, despite a few close calls, the S&P 500 has been higher one year after every mid-term election since 1950, on average nearly 15% higher.

This is often ascribed to the market’s preference for certainty. When the balance of political power is unknown, stocks weaken. When the outcome of the election becomes more obvious, stocks rally. This is regardless of which party that outcome favors. It’s a plausible story as far as it goes. 

This is the video recording of the August 25, 2022, Weekly Town Hall w/ Willie Delwiche.

08/25/22 2:00 PM ET

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

From the Desk of Louis Sykes @haumicharts

There's nothing more annoying than a stubborn injury that just won't go away. All you want is to exercise or to play a sport, but you're just physically unable to do it.

Among high-level athletes, there are countless stories of seasons, careers, even livelihoods lost due to injury.

I'm quite possibly the furthest thing imaginable from a high-level athlete, but I have been dealing with a minor shoulder injury of my own.

I'm working with physios to get some mobility on my left shoulder back so I can finally make use of the home gym I've recently built in my garage.

It certainly wasn't an acute injury, more of a cumulative thing worsened by living a lazy university student's life. And it's correctable. It might not be easy, but it can be fixed.

There are many types of injuries, some the consequence of normal use, some that stem from genuine human error. 

And then there's outright stupidity.

Jim DeFranco, the executive vice-president of Dish Network $DISH, is on our list again today with his fifth Form 4 filing in August alone.

DeFranco, who co-founded the broadcasting company over 40 years ago, disclosed a purchase of $2.5 million in his latest filing.

The average stock on the Nasdaq bounced over 40% off it's lows this summer.

That's a serious squeeze.

But let's remember that a lot of that stuff is junky and had gotten crushed, so of course they'll have strong bounces.

Over on the NYSE, the average bounce has been less pronounced but still got into the high 20s in percentage terms.

So today let's take a look at how each of the S&P Sectors have performed since the list of NYSE new lows peaked 2 months ago:

We debuted a new scan recently which goes by the name- All Star Momentum.

All Star Momentum is a brand new scan that guides us towards the very best stocks in the market. We have incorporated our stock universe of Nifty 500 as the base this time around. Among the 500 stocks that we follow, this scan will pump out names that are most likely to outperform the market.

From the Desk of Steve Strazza @Sstrazza

The bulls have moved back into the driver seat over the past few months, as a good deal of technical damage was repaired during the summer rally.

It appears that the weakest stocks have at least stopped falling as growth indexes have transitioned to more constructive, base-building action since late Q2. 

And, more recently, the strongest sectors during the current cycle have reclaimed key levels. 

We’re talking about materials rallying back into their old range and energy stocks resolving above a shelf of former highs. 

As both cyclical sectors are now back above our risk levels, we are looking for the strongest stocks to buy to express a bullish thesis on these groups.

When we think about the strongest stocks within materials, the coal industry and its recent resilience is top of mind.

We see no reason why the relative strength from these stocks shouldn’t continue, so let’s dive in and outline some of our favorite charts in the space.

Before we do that, here’s our equal-weight custom index, which includes the largest coal stocks listed on US exchanges:

...

From the Desk of Ian Culley @IanCulley

I can’t think of an area of the market we like more than energy.

Both energy stocks and commodities held up better than their peers during the recent bout of selling pressure. And now that they’re starting to reclaim key levels, we want to put our bullish bias to work.

I recently expressed my growing unease with a short crude oil position, given the mounting bullish evidence in energy. So, let's talk about how I plan to flip the book long crude oil futures on a break higher.

From the desk of Willie Delwiche.

Key Takeaway:  It takes bulls to have a bull market. Seeing cyclical sentiment moving from pessimism to neutral in recent weeks has been fuel for the rally off of the June lows. From both a fund flow and survey perspective, investors have been increasing participation since mid-year. But with a robust appetite for Risk On assets still not apparent, the biggest risk from a sentiment perspective is that macro headaches fuel an uptick in pessimism that overwhelms the positive thrust developments of the past few weeks. That could lead to a more complete unwind from a strategic positioning perspective. For now, optimism is on the rise but far from excessive, and that tends to be a sweet spot for stocks.

Sentiment Report Chart of the Week: Households Hold On To Stocks

From a short-term and intermediate-term perspective, volatility in the first half of 2022 fueled fear and pessimism that moved toward historical extremes. From a longer-term perspective, the unwind in optimism...

This is the video recording of our August 24, 2022, Inside Scoop Weekly Strategy Session.