From the desk of Willie Delwiche.

Our dynamic portfolio update discusses some changes we've made to our holdings and takes a look at how the portfolios are faring in a period of heightened volatility for static 60/40 portfolios. We re-positioned our foreign equity exposure to move into areas of strength and adjusted our cash levels to stay in harmony with our risk indicators and the overall message from the weight of the evidence.

From the desk of Willie Delwiche.

Key Takeaway: Investors are identifying with fear and pessimism as bears dominate the surveys. But we have yet to see the type of pessimism that drives market participants to do something about it. The disconnect between what investors are saying and what they are actually doing is evident in the juxtaposition of bearish surveys and elevated stock allocations. This speaks to an underlying confidence that remains unbroken and a lingering optimism susceptible to further unwind. Combined this with lackluster breadth readings, our global trend indicators nearing new lows, and a general lack of risk appetite and it’s difficult to claim the unwind in sentiment is complete.           

Sentiment Report Chart of the Week: Unwind Complete When Appetite Returns

Even with historical context, identifying real-time sentiment extremes is a challenge. It is said, “nothing changes sentiment like price,” and I would add the caveat that price does not always persist. Seeing evidence that a price move...

This is the video recording of our March 23, 2022, Inside Scoop Weekly Strategy Session.

We don't go bottom-fishing around here often. Fighting trends is not my idea of a good time.

But every so often we'll come across a beaten-up name that has so decisively destroyed bulls that there is no fight left in them. And when all the hot money has capitulated and exited their positions, THEN it becomes a compelling idea.

One such name in the Marijuana space -- yep, that utterly annihilated sector -- has found support at a key former resistance level after a 90% pullback from all-time highs

There are a handful of interesting Form 4 filings on today’s list.

One name that stands out is the popular meme stock GameStop $GME.

Monday night we held our March Monthly Conference Call, which Premium Members can access and re-watch here.

In this post, we’ll summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

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

The unwind is on in the aussie!

After accumulating a historic net-long position last fall, commercial hedgers are scrambling to cover. Over the past four weeks, the smart money has trimmed its long exposure to roughly half of what it was.

This is reflected in our most recent Commitment of Traders Heatmap, which you can view here.

When positioning flips at extremes – like we’re seeing now in the Australian dollar – we want to look for opportunities to ride the emerging trend. In other words, we want to bet in the direction that commercial hedgers are currently unwinding away from. 

In the case of AUD, they recently had a historic net long position. As such, we’re looking for bullish technical characteristics to see if a long setup makes sense here.

It just so happens that things are really coming together for the aussie chart lately. We love when technicals and sentiment line up like this.

...

From the desk of Willie Delwiche.

Key Takeaways:

• Stocks struggle when the Fed is aggressive
• Pace of tightening likely to be more than twice as fast as last cycle
• Bond yields at multi-year highs, rising at fast pace in a decade

After waiting and watching as inflation soared to its highest level in 40 years (and got there at the fastest pace in nearly three-quarters of a century), the Fed now finds itself behind the curve and needing to accelerate quickly. Post-mortems can be done later, and future historians can write papers about how the Fed was too focused on labor supply and supply chains and not focused enough on money supply as it delayed lift-off. Our focus is not on those “why’s” but on these “what’s”: what is the path for rates going forward and what is the impact of this for the stock and bond markets. 

Let’s start with the punchline and work back through the evidence. Stocks typically struggle for traction when the Fed is pursuing an accelerated pace of tightening. This is a sharp departure from the...

In yesterday's note we outlined our new tactical approach to the crypto market.

For those who missed it, after playing defense and remaining patient on the sidelines for many months, we're now seeing signs conducive to Bitcoin resolving higher from its multi-month consolidation.

Alongside this, we're noticing a ton of great setups in the alts.

It's been a while since there's been such a breadth of good setups, which can only be seen as a positive development.

Today’s Hot List is a short one.

As the market takes a pause following four straight up days, options traders are using puts to fade the bounce in UP Fintech Holdings $TIGR and HP $HPQ.

The market is in a recovery mode and certain stocks are outperforming others. As always, those are the names we're interested in!

Let's check out a long idea from the Paper segment.

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.

This is the video recording of the March 2022 Mid-month Conference Call.

• The Inflation Trade Persists - In Bonds & Commodities
• Bearish Sentiment in Stocks - Setting Up For Further Squeeze
• Stocks for Rising Rates Showing The Most Strength
• Metals & Mining Stocks Still Showing Leadership
• A lot of Bullish Retests In Global Markets Ex-U.S.
• My Favorite Gold Stocks To Own Right Now
• Which Growth Stocks to Bottom Fish Down Here
• Why Aussie/Yen is so important to watch right now
• Bitcoin AVWAP at 46K

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...

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 March 18, 2022. This report is published bi-weekly and rotated 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.

Whether we’re measuring increasing interest based on...

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.

A Reversal In Risk

Not only are the most battered areas of the market digging in at logical levels of support and resolving higher, so is high-yield debt relative to Treasuries (HYG/IEI). This crucial ratio is an inverse illustration of credit spreads as we’re comparing the bond prices instead of the yields. HYG/IEI putting in a potential failed breakdown and resolving higher speaks to a reprieve in market stress and bodes well for risk assets. It’s no coincidence that we’re seeing similar action at the index level as the S&P 500 is back above its January lows. Bulls want to see this ratio catch higher in the coming weeks as this would support a tradable low and fresh rally for stocks as risk-seeking behavior re-enters the market. There is still some work to do, but we’re moving in the right direction.

...

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.

• This week, our macro universe was green as 70% of our list closed higher with a median return of 2.67%.
• High Beta $SPHB was the winner this week, closing with a massive 8.93% gain.
• The biggest loser was the Volatility Index $VIX, with a weekly loss of -22.37%.
• There was a 2% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 21%.
• 38% of our macro list made fresh 4-week highs, 9%...

From the desk of Willie Delwiche.

Key Takeaways:

• Rally lacks conviction.
• Looking for a thrust I can trust.
• Fed and bond market moves become headwinds for stocks.

In addition to these market concerns, the liquidity backdrop is presenting a more acute challenge for equities. The Fed raised rates 25 basis points last week and the futures market is now looking for another 100 basis points of tightening combined at the May and June FOMC meetings. Corporate bond yields are rising at their fastest pace since the financial crisis and more than half of global central banks are now in tightening mode. During the last cycle, it took the 2-year Treasury yield more than 6 years to move from its low to back above 2%. This cycle it completed that move in just over 1 year. The pace of tightening (from the bond market and from the Fed) matters for equities. Stocks tend to struggle when that pace is elevated, as it appears to be in this...