To quote Steve Strazza: "When commodity stocks go, they go!"

This pretty much sums up the talk we had this morning when coming up with today's trade idea.

We were looking across the strongest sectors and hunting for opportunities to get involved. One challenge we were having is many of the stocks we liked had either already had a big move and we'd be chasing, earnings were on deck in less than a week, or the options chains were too thin for us to get good fills.

Finally, after some searching, we found a name that made sense. And it was one I wasn't familiar with.

If you've been involved with crypto, chances are you've encountered a headline like this:

Crypto investors seem to appreciate these statistics. But most likely aren't aware that the mechanism of forced selling can provide an incredible wealth of information.

Believe it or not, we can use this data to manage risk, find future support and resistance zones, and even help piece together a macro directional bias.

First things first, what is a liquidation?

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

In April 2020, crude oil traded below zero and marked the perfect capitulation event for a number of trends.

Around the very same time, both commodities and stocks bottomed and kicked off major rallies.

Until recently, commodities had underperformed stocks for about a decade. To make matters worse, they were moving lower on an absolute basis for most of that time as well. 

Not only have commodities started to trend higher on an absolute basis again. They're also undergoing a reversal in their relative trend with stocks and other alternatives.

We’ve been clear about our bullish position as we’ve discussed the potential for a new commodity supercycle for over a year. 

Now, we want to take that thesis one step further as the evidence is building in favor of commodities experiencing a sustained period of outperformance relative to stocks.

To best take advantage of this trend, we want to be overweight commodities and commodity-related stocks.

Let’s...

From the desk of Willie Delwiche.

Key Takeaways:

• Risk pairs moving toward risk off extremes
• Risk On is weakening more than Risk Off is strengthening
• Risk indicators point to risk off environment across multiple time frames

After highlighting our Risk Off - Risk On Range-O-Meter last Friday, I want to do a deeper dive into what we are seeing from a risk perspective. A majority of our Risk Off vs Risk On asset pairs (13 of 20) have seen more strength out of the Risk Off component than the Risk On Component in recent weeks. Over the past month the average pair has dropped below the 50% threshold and is now in the bottom half of its recent range. Financial sector pairs (Broker Dealers vs S&P 500, Regional Banks vs REITs) stand out as exceptions - areas where Risk On assets are showing strength and working toward new highs).

When we view this through the lens of our Custom Risk On - Risk Off...

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

The US dollar can’t catch a bid.

Since briefly reclaiming its November highs last month, it’s been nothing but down and to the right for the US Dollar Index $DXY.

Many global currencies have reacted by catching higher – especially the euro. But commodity-centric currencies – like the Canadian and Australian dollars – have had a more muted reaction. We think that’s likely to change in the coming weeks and months.

With interest rates on the rise around the world and crude oil prices pushing above 90, we think it’s just a matter of time before we begin to see some real strength from these currencies – especially if we see a sustained downtrend in the USD.

Today we’re going to highlight one of these forex pairs, as we think it’s poised for a major move. Let’s talk about the USD/CAD.

Here’s a weekly chart of the USD/CAD cross:

...

Music week continues here at Allstarcharts with a little R.E.M. today.

Yesterday we were wondering "What's Going On?", to quote the great Marvin Gaye.

So on today's note, we'll try to answer the question: Is this, in fact, The end of the world as we know it?

And for me, the answer is a big fat NO if these two indexes are above their 2018 highs:

No, not Santa. He already came and went.

JC came to Boulder yesterday (where I Iive) and we were able to get together to enjoy a late dinner. It was a great opportunity to reflect on how far we’ve come and what we’ve already accomplished.

All Star Charts launched about 13 years ago. And we launched All Star Options nearly four years ago.

During this time, we’ve seen big bull runs, panic-inducing corrections, and everything in between.

But the one constant has been

In yesterday's note, we outlined our macro Bitcoin/crypto thesis.

In essence, the market is leaving a considerable oversold zone driven by modestly strong spot flows by whales and institutions.

Now that momentum is back in favor of the bulls on the break of 41,000, we're beginning to deploy our elevated cash positions back into Bitcoin and a variety of trades.

In today's note, we'll discuss a few names we like monitoring for long and short positions and how we're approaching price action from a tactical perspective.

Let's begin by addressing shorter time frame developments.

Today we're taking a pick from the Consumer Durables 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.

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...

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 February 4, 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 seeing an unusual increase in investor interest.

Watch this video for a behind-the-scenes look at our process.

Whether...

From the desk of Willie Delwiche.

Key Takeaways:

• It takes energy to stay on top of this market.
• Follow the leader goes global.
• Higher bond yields are adding market volatility but not financial stress.

Key to last week’s shift in the weight of the evidence from bullish to neutral was the continued deterioration in breadth trends, especially in the US. On everything except the shortest of time frames we continue to see more new lows than new highs. Over the past two months, there have only been two trading days on which the...

Whenever I'm trying to figure out what's going on, I can't get that Marvin Gaye song out of my head.

But the tl;dr of it is that US large-cap stock indexes are holding support. So far, anyway.

We laid out the key levels a couple weeks back.

But also notice how we've been seeing more strength around the world, with the US acting as one of the laggards. It probably has something to do with all that growth exposure in a lot of US large-cap indexes.

Most other countries don't have that.

Here you can see the Dow Jones Composite Index holding that key 11,200 area. This is a good representation of what we're seeing in a lot of other major indexes and sectors:

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.

Rates Spike Around The Globe

Interest rates are on the rise, and it’s not just in the US and Europe. The Japanese 10-year yield hit its highest level in over five years last week. Like Germany, Japan is now back in positive territory after a half-decade of offering negative yields. All of this action is supportive of the new highs we’re seeing from the US 10-year yield. With rates on the rise around the world and the question turning into “how high” – as opposed to “if” – the FED will hike, it’s time to look for opportunities in the areas of the market that benefit the most from a rising rate environment.

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.

Macro Universe:

• Our macro universe was green this week, as 72% of our list closed higher with a median return of 1.53%.
• This week, US 10-Year Yield $TNX was the winner, closing with an 8.31% gain.
• The biggest loser was the Volatility Index $VIX, with a loss of -16.05%.
• There was a 2% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 28%.
• 13% of our macro list made fresh 4-week highs, 11...

I love when the team feels a little "frisky" and hunts for "speculative" ideas. There's nothing that gets the creative juices flowing more than getting outside the wheelhouse a bit, looking for new experiences.

This lead them down the path of picking through the wreckage in Chinese stocks.

In the recent Monthly Candles Strategy session (find the charts here), JC highlighted a couple names in China that are offering speculative opportunities for those willing to step boldly where most bulls are too sheepish to look.

As options traders, we too can join the party. But we can minimize the risk better while still participating if the speculators have their way.

In last week's report, we outlined a handful of bullish developments appearing as we waited for price action to respond.

We discussed the fact that the institutional money that left in October is flowing back, exchanges are seeing modest outflows, and traditional markets are looking prime for a tactical bounce.

Since then, we've seen Bitcoin rally to our inflection point between 41,000 and 42,000.

With momentum turning back in the favor of the bulls, the highest-likelihood scenario looks to be a few weeks of sideways price action ahead of further upside follow-through.

This week I had a great conversation with Jeremy Schwartz on the Behind The Markets Podcast on SiriusXM Radio.

Jeremy and I have been through a few cycles throughout our careers and probably understand the weightings of Indexes and ETFs better than most investors. Which was a big point I was trying to make: Understand what you own. You need to know what's inside of these things, and more importantly, what's not.

There's a lot going on in today's market but I tried to really focus in on the primary trends and where I think we're going this year.

Last time we did this I got to go down to the studio at the Wharton School at the University of Pennsylvania. But the weather was bad so we recorded remotely. Hopefully I can make it down there soon and we can do it live from the University once again.

Either way, I think we hit on a bunch of key points on this episode.

Hope you enjoy!

It's Saturday Morning Chartoons time. 

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

You can find the whole list of trades here.

Below you'll find the full PDF of this week's charts: