From the desk of Louis Sykes @haumicharts

This week has seen one of the largest blow-ups in crypto history.

I think the severity of the Luna collapse, in relative terms, can't be understated.

From trading at $100 a month ago to 2 cents today.

From being the 3rd largest coin in the asset class two weeks ago to currently testing support at zero.

From an 80% drawdown in a "stable" coin that's supposed to be pegged to $1 USD.

There's an incredible amount of wealth that's been lost in this blow-up.

There are a lot of charts that looks very similar to this one.

Tops are a process right?

This is what this one looks like:

Jan Barta of Pale Fire Capital revealed an additional purchase of roughly $23 million in Groupon $GRPN, as he continues to build a position.

The CEO and the president of OPKO Health $OPK revealed a purchase of approximately 400,000 shares of his company's stock in a Form 4 filing.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Credit spreads are widening to their highest levels since late 2020.

If it feels like we just mentioned spreads and the falling HYG/IEI ratio, it’s because we did – and for good reason! They provide valuable insight into the overall health of the market.

High yield bonds $HYG rolling over faster than US Treasuries $IEI implies stress on credit markets and trouble for equities.

This is critical information.

We’ve been closely following the HYG/IEI ratio for months as it repeatedly tests the lower bounds of its range. It broke down to fresh lows in March, only to bounce higher with many risk assets.

Two months later, this crucial risk ratio is printing fresh 52-week lows again. The main difference is that the overall market environment has drastically changed since the last time we were at these levels.

Even the strongest stocks can’t catch a bid as investors...

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.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some...

From the desk of Willie Delwiche.

Key Takeaway: The unwinding of a liquidity-fueled speculative bubble is weighing on investor sentiment, pushing many indicators into areas that signal excessive pessimism. The challenge in the current environment is the disconnect between how investors say they are feeling and what (if anything) they are doing about it. Popular sentiment surveys are so widely watched that they seem to be producing more noise than signal. This makes less widely followed surveys (like those from Consensus and NAAIM) more useful. ETFs overall have begun to experience outflows, but there is still plenty of evidence that investors are looking for ways to increase equity exposure.

Sentiment Report Chart of the Week:  Buying Weakness Isn’t Evidence Of Fear

Echoing the message from the AAII asset allocation survey is a Investor Movement Index from TD Ameritrade that shows investors were “net buyers of equities in April.” That’s an unlikely way to express the fear and pessimism that is evident elsewhere. A...

This is the video recording of our May 11, 2022, Inside Scoop Weekly Strategy Session.

 

"MARKETS IN TURMOIL!" -- they said.

But yeah, it certainly feels like it when seemingly every "relief rally" is met with fierce selling.

In our morning analyst meeting today, the team was lamenting the fact that it seems any levels of support that might seem obvious are proving to be nothing more than mirages. Levels are getting taken out everywhere.

This makes it increasingly frustrating to put on any kind of range-bound delta neutral plays. Yes, volatility is high and its very tempting to put Iron Condors or Strangles on here. But if we're looking for instruments that are likely to stay within a certain range, we just don't have any confidence right now in any levels on our screens.

Ok, so how about we bottom-fish for some bounces?

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

 

From the desk of Louis Sykes @haumicharts

The last few days have seen one of the largest unwinds and destruction of wealth in crypto history.

By historical standards, the collapse in the Terra ecosystem will go down as some of the most wide-reaching, systemic stress the asset class has endured.

We want to dedicate a good portion of this week's crypto letter to why UST failed, how it impacted other assets, and our outlook following this event.

I think it’s safe to say insiders are buying the dip!

This might be the most Form 4 filings we’ve seen in a single day since we started doing this.

And we’re seeing activity in all different sectors, from software to chemicals, including even casinos.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

Despite the rising US Dollar Index, strength among commodity-centric currencies has been a key theme for much of this year. 

Today, that’s no longer the case.

The rally in the USD is accelerating, as dollar strength broadens to even the most resilient currencies. 

Two of the top commodity currencies – the Australian and Canadian dollars – are undercutting the lower bounds of their current ranges and making fresh 52-week lows.

These breakdowns mean the path of least resistance is now lower. If these are valid resolutions, we’re looking at increased headwinds for risk assets.

Let’s look at a couple charts of the AUD and the CAD, highlight the levels we’re watching, and discuss what continued weakness in these major currencies means for stocks and commodities.

First up is the Australian dollar-US dollar cross:

...

From the desk of Willie Delwiche.

A risk off environment persists. Leadership areas are coming under pressure as market correlations rise (as they typically do in periods of stress). We are reducing our exposure and move to the sidelines to ride out this period of volatility.

From the desk of Willie Delwiche.

It’s hard to get away from the crowd when you only ask the questions that everyone else is. When we ask better questions, we get more relevant answers. The questions being most asked right now focus on whether we are going into a bear market and whether we are seeing capitulation (“Was that the bottom?”).

• A bear market has been evident beneath the surface (at least since late 2021, but in some ways for over a year). It’s now showing up in the indexes. The Value Line Geometric Index is below its 2018 highs (as well as its Jan 2020 pre-COVID peak) and is in a 20% drawdown (the line in the sand many use to identify bear markets).
• I understand the allure of trying to call a bottom in real-time (or close to it). But I’ll let the market sort that out. The crowd, focusing almost exclusively on their favorite sentiment data, has been doing that all year and so far at...

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

 

The most significant insider transaction on today’s Hot List is a Form 4 filing by the CEO of Uber Technologies $UBER, Dara Khosrowshahi.

The Silicon Valley executive revealed a purchase of roughly $5.3 million of his own stock.

The selling pressure in stocks and other risk assets continues to persist.

What are we looking for to turn this thing around?

I sat down with Liz Claman yesterday on Fox Business to discuss exactly that.

This one is short and sweet. What are the key levels? Where are we looking for leadership?

If bonds catch a bounce, who will lead out of the hole?

The US Dollar is back up to its 2016 and 2020 highs.

On both of those occasions, the Dollar sold off and risk assets went on to do very well.

Is this time different?

Here's what it looks like:

The market remains in a volatile territory. We have just a few industry groups which continue to show relative strength. The defense sector is one of them.

Read on to know more.

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...