From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

There’s been very little happening on our risk checklist, as evidence for risk appetite remains split between bulls and bears. 

The last time we discussed it was in our Q1 Playbook. While the list hasn’t picked a decisive direction yet, the fact that it's such a mixed bag is information in and of itself.

It's been an excellent roadmap for us in recent months, because just like the market -- our risk checklist has also been a mess. 

Let's take a look at where we stand and discuss some of the more recent developments.

Here it is, with a current reading of 44%:

This tells us that the majority of checklist items are actually below our risk levels and in risk-off territory. However, when we consider the selling pressure thus far in 2022, the list has held up quite well. 

Here's a time series of the percentage of assets in bullish territory charted beneath the S&P...

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

Not all stressors are debilitating.

In some cases, stress can push us to perform at our highest level. But, of course, there are instances when opposing forces become overwhelming, making it near impossible to reach our goals.

We’ve all been there.

And the markets are no different.

While we keep tabs on our heart rate or blood pressure to gauge our stress levels, we focus on credit spreads to measure stress in the market.

Given that rates continue to rise worldwide, it’s an appropriate time to evaluate these spreads and the potential obstacles that may lay ahead for risk assets.

We recently broke down credit spreads in anticipation of them widening and outlined some charts that are driving this trend.

Read our January 27 post for more information about the ins and outs of credit spreads and how we analyze them.

Since these spreads provide valuable information on the health of the overall market, we’re going to check back in and discuss another chart that is...

This is the video recording of the February 17th Weekly Town Hall w/ Willie Delwiche

02/17/22 2:00 PM ET

From the desk of Willie Delwiche.

I’m reading the book “Trillions” by Robin Wigglesworth right now. It’s about the rise of passive index investing – or, according to its sub-title, “How a band of Wall Street renegades invented the index fund and changed finance forever.” 

It’s been an enjoyable read so far. I’m about halfway through the book and am excited to see how it finishes. 

While Wigglesworth’s book has been written and published, the story of passive investing overall remains unfinished. If it is like other investing fads that have come and gone, some of the most exciting times (for better or worse) may lie ahead. History is littered with investment approaches that move from novelty to seemingly foolproof only to end in heartbreak and tears for those left holding the bag.

"JC I only invest in U.S. Stocks"

Why, because those are the ones that did the best over the past decade?

Is it too challenging for you to overcome your home country bias?

Or is it your recency bias that you can't get over?

My guess is that it's likely a healthy dose of both...

Here are your U.S. Indexes.

Messy, is putting it nicely....

These are the registration details for our live mid-month conference call for Premium Members of All Star Charts.

Our next Live Call will be held on Tuesday February 22nd at 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.

Here are the details for Tuesday night:

What's the trade today?

Is it a long? Is it a short?

Is it a neutral trade?

In today's video, Sean and I talk about what to do when there's nothing to do!

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

Consolidation and range-bound action have dominated the currency market since late last year.

While commodities and cyclical stocks -- especially energy -- continue to catch a bid, commodity-centric currencies like the Australian and Canadian dollars fail to show any definitive signs of strength.

At the same time, the US dollar isn’t doing much either, as the US Dollar Index $DXY has been chopping sideways for several months.

Long story short, indecision is the overarching theme for forex markets at the moment.

One forex pair that does an excellent job of illustrating the trendless nature of these markets is the AUD/JPY.

Here’s a chart of the AUD/JPY cross:

As you can see, the currency market’s classic risk barometer has gone nowhere for almost a year. It’s currently trading right in the middle of a wide range.

While this kind of prolonged sideways action can be frustrating, it makes sense given how bifurcated markets are right now...

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 point during...

From the desk of Willie Delwiche.

Key Takeaway: Speculative excesses have been unwinding for a year and that has taken its toll on investor sentiment. The overall mood is characterized by a lack of optimism rather than rampant pessimism. This is consistent with the grind lower in many areas of the market since new highs peaked in February 2021. The damage done beneath the surface has only in recent months impacted the indexes, but if that impact intensifies a further expansion in pessimism would not be surprising. Benchmark 60/40 portfolios have gotten off to their worst start in a quarter century and our strategic positioning indicators continue to point to a high risk backdrop. If there isn’t much of a reward at the end of the volatility rollercoaster, passive participants may start to actively question whether the ride was worth it.          

Sentiment Report Chart of the Week: Unwind Continues

While the popular averages peaked more recently, there is plenty of evidence to suggest we are now a year into an unwind...

Remember back in the day when crypto was its own thing?

It didn't matter what the Dow, copper, or bonds were up to because Bitcoin and crypto did whatever they wanted.

That ain't the case anymore.

Today's market is entirely different, with far more sophisticated drivers than just a few years ago.

Crypto and risk assets have become heavily correlated. And, in some respects, Bitcoin's really just been somewhat of a beta chase ever since the onset of the pandemic.

Last month, the 30-day correlation between the Nasdaq 100 and Bitcoin was an incredibly positive 0.90. They've traded in lockstep with each other.

So it's fair to say that if you're a crypto trader, it's paid to watch the macro environment.

But let's apply that thinking in reverse.

Humans are fascinating creatures.

Believe it or not, there are people still asking me if stocks will enter into a bear market.

Meanwhile over 70% of the Nasdaq fell 20% over the past year, and almost half the stocks on the Nasdaq got cut in half.

If you think that’s a bull market then you should probably check yourself into a mental hospital.

In Major League Baseball, the 40/40 Club is an exclusive group of players who are the only ones to have achieved both 40 home runs and 40 stolen bases in the same season.

The first player to achieve this milestone was Jose Canseco in 1988 as a member of the Oakland A’s – back during the “Bash Brothers” days with his steroids pal Mark McGwire.

Since then, only three other players have joined this list: Barry Bonds (1996), Alex Rodriguez (1998), and Alfonso Soriano (2006).

Here at All Star Charts, we’ve achieved a little bit of our own 40/40 dynamic as JC celebrated his birthday this week and joined me in the 40+ crowd of awesomeness. Perhaps it’s not quite as exciting as crushing home runs over the wall or swiping second base against catcher Yadi Molina. But I like to think it’s cool in its own way.

We’re not getting old, we’re getting seasoned – with a little extra sriracha.

Meanwhile,

From the desk of Willie Delwiche.

Key Takeaways:

• Flat-footed Fed hurrying to get policy in harmony with reality
• German yields paving the way for US yields to exceed expectations
• Higher yields adding volatility, but Fed to focus on evidence of stress

Developments in and around the Ukraine are dominating the headlines, but history shows that market turmoil brought on by geopolitical events tends to be short-lived. More meaningful and lasting developments are coming from the bond market as it adjusts to a Federal Reserve that appears intent to aggressively bring policy more in line with inflation. The Fed needs to catch up to inflation (and economic fundamentals generally) and the bond market needs to catch up to the Fed.

The 10-year yield reflects what the market thinks the economy can handle, the 2-year yield reflects what it thinks the Fed will do and the 3-month yield reflects what the Fed has done. It’s not uncommon for longer yields to move first and be followed by shorter-term yields. The dramatic narrowing...

The last time we discussed altcoins, we mentioned we were tactically shorting overbought names bouncing into supply while eyeing more intermediate-term long positions.

This approach paid off, with names like Gala $GALA and Sandbox $SAND succumbing to the selling pressure, booking a quick profit.

Moving forward, as we laid out in yesterday's note, the market's in a state of balance, and we have a neutral outlook.

This is the time when we're closely monitoring names showing leadership, waiting patiently for setups to solidify.

This will be a short and sweet note with three long trade ideas.

Today we're taking a pick from the Commodity sector. There's been a slight pick-up in activity along with a big base breakout. Which stock is it?

Let's take a look at the trade for this week!

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.

In last Monday's note, we discussed a variety of data points suggesting Bitcoin was in the beginning phases of carving out a tradable bottom.

We also mentioned that we anticipate a few weeks of sideways price action ahead of further upward price discovery. Since then, we've seen a handful of developments paint a more neutral picture.

Unlike spot prices, futures never flipped to buying and are still in a fairly strong regime of selling via calendar futures.

There's also been a gentle deleveraging of open interest and an increase in defensive positioning, as investors have been withdrawing capital off the back of geopolitical volatility.

Meanwhile, legacy markets continue to act as a headwind. Bitcoin and equity trading correlations remain high, and it's yet to be seen whether Bitcoin can front-run equity weakness, like what took place in October last year.

This all takes place as Bitcoin remains above our risk level of 41,000.

One of the limitations of evaluating spot flows since November is that despite...