Are you watching this?

We're seeing the fewest amount of bullish financial advisors since April of 2020, when things were as bad as it gets.

Now here we are just a few pennies from new all-time highs in the S&P500, and the bulls are in full retreat.

Panic mode has set in:

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...

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

The recent risk-off action came to a head last week, with commodities, stocks, and interest rates all violating key support levels. 

We saw a brief flight to safety, as long-term treasury bonds $TLT broke out to their highest level since early January.

Yes, money was flowing into bonds, which is not a good look for stocks and commodities.

Bottom line, there was a lot of damage done to the primary uptrend in a very short time. Market participants needed to come out and repair the damage ASAP.

In the handful of trading sessions since the selling stopped, bulls have managed to claw back much of the losses from last week.

Buyers needed to quickly step up to the plate. And that’s exactly what we’re seeing right now, as stocks and other risk assets are rebounding aggressively off the recent lows.

As for bonds, the breakout in TLT failed, and the 10-year and 30-year both snapped back above critical levels.

The bond market has been sending some strong signals lately for those who are listening. Let’s check in on some...

From the desk of Willie Delwiche.

Key Takeaway: Volatility is on the rise and the bulls are in retreat. The recent downside pressure on risk assets has driven investors to take caution. Yet, pessimism remains subdued as volatility was unable to stoke real fear. Now that the market is beginning to rebound, the bullish case needs to prove it deserves the benefit of the doubt. Price needs to justify the risk appetite that still lingers and participation needs to expand. On the flip side, another spike in volatility could woo the bears out of their seats and onto the dance floor. The market finds itself at a critical juncture heading toward year end. The action that unfolds in the coming weeks could well shape investors' approach to risk in 2022.

Sentiment Report Chart of the Week: Despite Some Caution, Investors Still Love Risk

Most of our sentiment indicators show more caution on the part of investors. When looking at Semiconductors, which are making new highs on an absolute and relative basis, the...

What a difference a couple of days makes!

The froth has definitely come off the $VIX spike over the past week. Does this mean we're all clear? Well, no. Not necessarily and not yet.

But it does give us a little bit of confidence that some short-term lows can be leaned against as good risk management levels when taking long directional bets.

There's still some juicy premium to be sold when looking at some sector ETFs and that brings me to the Biotech sector ETF $XBI.

We've been pretty vocal that the market is likely to be choppy to end the year. After big moves like we've just experienced, we tend to see a period of contraction that can whipsaw many traders.

The most likely scenario in our minds is that we see a sideways consolidation in a regime of negative funding while spot flows remain intact. Patience and sitting on the sidelines when whipsaws are dominant on price action can go a long way in saving financial as well as emotional capital.

This message of "sitting on the sidelines" has primarily been geared toward a time frame looking ahead for the coming weeks and the next month.

But, looking longer term, there are plenty of data points right now suggesting this recent selling pressure isn't the beginning of a deeper correction, which remains encouraging for those with a longer-term time horizon looking out into the next quarter and into 2022.

I had a nice chat this week with Aaron Task and Stephen Alpher over at Seeking Alpha.

We talked about why price matters most and how come media outlets choose to ignore it in favor of other things.

What's going on with US Stocks, Interest Rates, Crypto and which stocks are we buying?

We go over all of this and much more throughout our conversation.

This was a lot of fun. Check it out.

No matter which markets you're investing in, this is a good lesson.

The visual below comes from this Yesterday's Crypto Note. It shows the different scenarios that almost all cyrpto currencies currently find themselves in.

Most are below their former highs, and stuck in a range once again. You can put US Small-caps in that exact same category too, for example.

Homebuilders and Semiconductors look like the one on the left. You can put $LUNA $MANA $SAND $CRO and even $ETH in that category.

And then you can find a lot of nasty Cryptos that look like the one on the right. You can probably put the ARK Funds, Biotechs and China in that bucket too:

Over the past couple of months, we've seen the market give up its highs and settle lower. We also saw certain levels being breached and certain levels being held. But what is the outlook going forward? What are the levels that will be crucial to follow in the days and weeks ahead?

We're here today to discuss just that.

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

Last week, we pointed out that commodity-centric currencies were beginning to slide. 

Our petrocurrency index was making new 52-week lows, and the Australian dollar was on the verge of breaking down. By Friday’s close, the AUD/USD cross looked to have completed a topping pattern and was trading at its lowest level since the summer of 2020.

Seeing one of the world’s leading commodity currencies break down from a major distribution pattern would not bode well for commodities and other risk assets.

But the bulls aren't ready to roll over yet. Investors are back on offense this week, as buyers have already repaired all or most of the damage that was done to stocks and commodities last week.

They needed to come out swinging after the latest flurry of selling pressure… And that’s exactly what they did! 

We're also seeing very strong bounces in risk-on currencies like the Canadian dollar and the Australian dollar. What started out as a nasty resolution lower in the Aussie has...

From the desk of Willie Delwiche.

This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

From the desk of Willie Delwiche.

In yesterday's note, we outlined our neutral approach, pointing out that sideways, messy action looks to be the most likely scenario for Bitcoin.

We're currently in elevated cash positions, sitting on the sidelines waiting for a higher-conviction entry before moving back into aggressive long positions. It appears as if these next few weeks could involve a high concentration of whipsaws in the context of choppy price behavior.

But today is when we publish our full crypto chartbook, so we thought we'd share how we're approaching new longs, despite the evidence pointing to this being a messy market for Bitcoin.

There's really a common pattern appearing in the alts right now.

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 in their direction and make them a pretty penny...

From the desk of Steve Strazza @Sstrazza

Welcome to our latest “Minor Leaguers” report.

We’ve already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottom-up scan, “Under The Hood.”

We recently decided to expand our universe to include some mid-caps…

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B. And it doesn’t have to be a Russell component–it can be any US-listed equity. With participation expanding around the globe, we want all those...

From the desk of Willie Delwiche.

Key Takeaway: Indexes stumble as generals see their armies fleeing the field. Bond yields drop below important thresholds. Rising volatility brings focus back to managing risk.

• Energy slipped three spots (from 4th to 7th) in the large-cap rankings last week, and the sector appears even weaker beneath the surface. It's in the ninth spot on an equal-weight basis, and conditions are deteriorating within the mid-cap and small-cap energy space.
• Technology remains atop the overall rankings, but relative strength on a short-term basis is from coming from Utilities, Real Estate and Consumer Staples.

Options premiums still remain elevated across the board and therefore I continue looking for delta-neutral premium-selling strategies to implement.

We have to take whatever the market is offering. The recent downward price action has created a bunch of resistance levels to lean against on the upside. So I want instruments that also have clearly defined support levels and high premiums for us to sell.

This leads me to...

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.

Stocks Test September Highs

The Dow Jones Industrial Average and the Dow Jones Transportation Average are both struggling at key Fibonacci extension levels from their 2018 drawdowns. Mid-caps and bank stocks are trapped back beneath key levels of overhead supply at their first-half highs. And the small-cap Russell 2000 is trading back toward the lower bounds of its year-to-date range. The majority of stocks are simply consolidating in holding patterns right now.

When we zoom in on the S&P 500, as we’ve done in the chart below, the importance of the September highs is hard to ignore. In November, price rallied to the first extension level from its fall drawdown. In the few weeks since, the index has retreated straight back to its prior peak near 4,540. For now, buyers are digging in and defending these pivot highs. Bulls need this level to hold if stocks are going to stop the bleeding and carve out a...

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 in the red again this week, as 68% of our list closed lower, with a median return of -0.42%.
• Lumber $LB was a massive winner, closing out the week with a gain of more than 18%.
• The biggest loser was US 10-Year Yield $TNX, with a weekly loss of -9.38%.
• There was an 11% drop in the percentage of assets on our list within 5% of their 52-week highs (currently at 38%).
• 64% of our list made...