It's the weekly commodity edition of What the FICC?

Every day we have the choice to either follow the news or follow trends. I choose the latter...

Check it out!

Inflation has peaked!

Or so I’ve been told… 

Rates are rolling over, undercutting their June highs from last year. High-yield debt, including emerging-market bonds, is catching a bid.

And major commodity indexes are on the verge of breaking down.

That all sounds logical to me.

But just because inflation might begin to ease doesn’t mean I’m taking a bearish stance on inflationary assets, especially commodities.

As crazy as that may seem,  these next four charts support my case…

Check out the long-term chart of gold futures overlaid with copper:

These metals are in the process of carving out decade-long bases.

Based on Friday’s intraday action, gold is trading above its prior commodity supercycle peak at approximately 1,924, while copper is holding less than 50 cents...

From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts

Risk appetite is returning to markets as breadth expands beneath the surface for US and international equities.

Insiders are getting more active and more aggressive, and the number of bullish opportunities from our Inside Scoop universe continues to increase gradually.

We think the coming months and quarters will be a favorable environment for those looking to buy stocks.

With that said, we have a handful of bullish setups today. Let's dive right in.

What do the movies The Wizard of Oz and The Matrix have in common? The answer is that they both are stories about artificial intelligence.  The Wizard of Oz is one of the earliest examples of this in popular culture, with the philosophical question of what types of AI matter most - was it the Scarecrow, who needed brains (computational power), or the Tin Man, who needed heart (the emotional intelligence to understand us)? 

Thanks to the efforts of early pioneers in the field like Alan Turing in the 1950s, who helped address and begin work on these problems, we can fast forward 70 years and marvel at contemporary companies like OpenAI, that have solved many of those initial challenges.  

Here at All Star Charts, we’re more old school – but we’re not outdated.  We know that the foundations of technical analysis are predicated on the study of behavioral science, and how biases like price anchoring, fear, and greed create repeatable patterns we can take advantage of. 

And since we’re on the subject, it turns out that investors, computers, whoever or whatever is driving the market moves we’re seeing today; they’re paying attention heavily to...

From the Desk of Kimmy Sokoloff

This is the third Friday in a row that we've had a melt-up.

We closed the gaps on the indices, and away we went.

From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts

Our International Hall Of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.

We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut. 

These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.

It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.

The beauty of these scans is really in their simplicity.

We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.

Based on the market environment, we can also flip the scan on its head and filter for weakness.

Let’s dive in and take a look at some of the most important stocks from around the world.

Here’s this week’s list:

...

This is the video recording of our January 20, 2023, All Star Charts Crypto Weekly Strategy Session.

From the Desk of Willie Delwiche.

Firms are still hiring but with average weekly hours being curtailed, aggregate hours worked appear to have peaked in Q4.

Why It Matters: Talk of a soft landing has intensified, but the data paint a different picture. Real spending peaked in Q1. Housing starts in Q2. Industrial production in Q3. Payrolls are still expanding and layoffs are near historically low levels. Given the structural imbalance between unfilled jobs and unemployed workers, those metrics are unlikely to be useful indicators of what lies ahead for the economy. Don’t even start with the unemployment rate, which has long been considered a lagging indicator. Rather than firing workers who were hard to hire in the first place, firms are keeping their payrolls largely intact. They are responding to softening demand by curtailing hours worked. Payrolls and initial jobless claims are noise in this environment. The news is that the economy is weakening, inflation is lingering, and the Fed is still raising rates.       

We had a resting GTC order filled at our profit target in the Paid-to-Play portfolio today:

Me and Strazza did The Flow show earlier in the week, and one of the names we discussed as being a possible trade to get into has finally popped its head above the trigger I was waiting for.

This one has the potential to be a quick mover, so let's get right to it!

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

The most significant transaction on today’s Hot List is a Form 4 filing from Brent Baird.

Baird disclosed a purchase of 11,661 shares of Servotronics Inc $SVT, equivalent to $130,671.

From the Desk of Kimmy Sokoloff

Currently, $SPY is in a trading range between 391.20 and 386.

We can base more before the next move occurs.

A funny thing happened last summer.

Financials as a sector successfully retested the highs in price from just before the start of the Great Financial Crisis.

Look at the 2007 peak in Financials. After testing that level and failing in 2018 and 2020, prices ultimately broke out.

Last summer was the retest.

Former Resistance turned into Support:

It's the weekly bond edition of What the FICC?

The relative strength of Emerging Market bonds shores up the ongoing bottoming process for risk assets.

Check it out!

From the Desk of Ian Culley

It’s impossible to ignore – investors are reaching for risk.

Biotech stocks are catching higher. Copper futures are working on their tenth up-day in a row. Even the Emerging Market HY Bond ETF $EMHY is breaking to 7-month highs as it completes a multi-month base. 

And don’t forget about Silver! Gold’s crazy cousin has proven by far the best-performing asset since the US dollar peaked last fall. Strength among these market areas indicates a healthy risk appetite.

I can’t overlook these signs of a constructive bottoming process, especially considering the next chart…

Check out the Emerging Market Bond ETF $EMB relative to the US Treasuries ETF $IEF:

There’s plenty to unpack here…

First, the EMB/IEF ratio is challenging fresh 7-month highs after posting a higher high and a higher low last fall. A bearish to bullish trend reversal is underway for this important risk-on ratio.

You can add this to the growing list of...

I got a lot of feedback on my last letter where I suggested active traders need to stop trading Covered Call spreads for tactical trades and instead do a simple Naked Puts trade.

Thank you to everyone who engaged.

Anyway, here’s one question [edited to the important parts] I got from a reader where I thought my answer might be instructive to more of you:

Hi Sean,

I read your information on naked puts. When I intend to buy a stock, I would like to sell a put. I just don't know how to go about it. I just don't know where the strike price would be. I understand that I would have to buy the stock at that price (whether it is better or worse than hoped).

If you could give me an example that would help.

Cheers!

This is a great question, but one without a clear-cut answer. Here was my response:

From the Desk of Kimmy Sokoloff

It was very whippy price action today in individual names.

We saw a lot of stop outs in the morning, then some recovery later on.

Forget cryptocurrencies. Look at these crypto stocks!

Seriously, some of these moves have been nuts.

We took a small long in MicroStrategy $MSTR at the lows, and it hit our 50%-plus target in just two weeks.

Crazy...

If cryptocurrencies are going to start trending higher -- which is our bet -- these stocks face serious resistance.

But let's approach this with a level head.

This is the video recording of the January 19th, 2023, Weekly Town Hall w/ Willie Delwiche.

1/19/23 2:00 PM ET