From the Desk of Kimmy Sokoloff

That was a wild move yesterday. Almost everything reversed lower.

I'd like to think this is simply just a healthy consolidation before a potential move higher for the indices.

It’s another short one today.

However, we do have some founder activity in the recreational vehicle manufacturer Thor Industries $THO.

The way I learned it was that we want to buy stocks when the journalists put a chart on the cover of a magazine.

I like to pick on The Economist because they have such a great track record of being the last ones to the party.

Here's a good run down of a few favorites and part of the reason we got so cautious last Spring.

Fast forward to today: Can we classify this one as a chart? Does this count?

The Outperformers.

The Outperformers is our custom-made scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for significant moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

From the Desk of Ian Culley @Ianculley

If you can pry your eyes from the UK gilt and Credit Suisse articles, you’ll find it’s not all doom and gloom across the bond market – especially high-yield debt in the US.

A quick warning before we continue: You probably won’t see a similar message on the financial news. It’s just too optimistic for the current environment. It wouldn't get enough clicks.

But facts are facts. And right now, high-yield bonds are hooking higher, while stocks are also rising.

Check out the dual-pane chart of the Fallen Angel High-Yield Bond ETF $ANGL and the S&P 500 $SPX: 

ANGL tends to bottom with the S&P 500 at significant turning points. That’s because high-yield bonds are risk assets more akin to small-caps than investment-grade debt or Treasury bonds. 

A sustained breakdown in ANGL implies growing risk aversion among investors. But that’s not what we’re witnessing...

According to the Wall Street Journal, options volume continues to explode – driven primarily by the growing popularity of short-dated options.

Whether looking to speculate, hedge or collect premiums, options players are increasingly flocking to options that have fewer than 7 days to expiration. And with the proliferation of weekly options and three-times weekly expirations in popular index ETFs like $SPY, $QQQ, and $IWM, traders frequently have the opportunity to trade options expiring within 24 hours!

It is no surprise that these types of short-dated options are attractive to some players. They offer the best characteristics of options: defined risk, leverage, and affordability for even the smallest of traders.

Of course, there is no free lunch. As nice as all the pros are, the cons are equally supersized when the ass-end of gamma smacks your trade in the face. As quickly as profits can accumulate...

From the Desk of Kimmy Sokoloff

So, we had a decent consolidation day.

We just have to make sure this market hangs on.

This is the video recording of the October 6th, 2022, Weekly Town Hall w/ Willie Delwiche.

10/06/22 2:00 PM ET

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 and our Playbook Chartbook, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.

The S&P 500 just narrowly avoided finishing Q3 with the first back-to-back-to-back 3%+ weekly declines since 2009. It followed that up with the first back-to-back 2.5%+ gains since December 2008 to start Q4. Volatility isn’t showing up in the VIX but it is apparent in the daily and weekly price action.

Why It Matters: There is an inverse relationship between market volatility (as measured by big daily swings, in either direction) and market strength (as measured by new highs > new lows). In the past quarter...

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

We held our October Monthly Strategy Session Monday night. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

From the Desk of Louis Sykes @haumicharts

One of our favorite anecdotal indicators is the classic magazine cover.

Journalists do a tremendous job of aggregating consumer and investor sentiment.

By the time these magazines and other features take time to plan, develop, and eventually publish their covers, they're always going to be late to the party.

That time delay often presents a prime opportunity for investors.

Similarly, ETF providers also give us a wealth of sentiment information, particularly when it comes to ETF launches and de-listings.

ETF providers have a hilarious track record of launching funds at the complete worst time while de-listing them right before things get going.

A classic example is the coal ETF that got de-listed right before the epic bull market in coal stocks just began.

In crypto, we have yet another insightful indicator, one I like to call the "FTX indicator."

People get so angry when I tell them that Energy stocks haven't even broken out yet...

The historic outperformance in Energy over the past 2 years is just the pregame.

The real party hasn't even gotten started.

The DJ is still setting up....

We haven't even mixed the jungle juice.

Take a look at the Energy Sector Index still stuck below those 2008 highs. And its largest component Exxon Mobil (23.7% weighting) below those same levels:

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

From the Desk of Kimmy Sokoloff

Yesterday, the market had a nice comeback from the morning lows. This morning, the futures are pulling in some, and, to me, this is still healthy.

Hopefully, we can trend higher or sideways throughout the day.

Now that there’s some clarity around the Twitter $TWTR/Elon Musk deal, the focus is shifting to how exactly it will get done.

Today’s reports claim that Apollo, Sixth Street, and others have ended conversations with Musk’s team to provide debt financing.

As it turns out, $44 billion is a lot of money, even for the richest man in the world…

From the Desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as "a market of stocks."

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions. But there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as The Hall of Famers, The  Minor Leaguers, and The 2 to 100 Club.

We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports.

Now, we're also highlighting lagging stocks on a recurring basis.

Welcome to The Short Report.

From the desk of Willie Delwiche.

We sold commodities and bought bonds while tweaking where we get our equity exposure.

The Details: While none of the major asset classes are in up-trends, bonds now hold a relative advantage over stocks and commodities. We adjusted the exposure in the Strategic, Cyclical and Tactical portfolios to reflect these shifts and also to reflect leadership shifts we have seen within equities.

From the Desk of Kimmy Sokoloff

That was a nice reversal for the indices today.

They held support where they needed to and then trended higher.

From the desk of Willie Delwiche.

Calling Baloney On Investor Bearishness

Investor surveys indicate widespread pessimism but asset allocation data (and ETF flows) paint a different picture. 

The Numbers: September saw the 5th and 6th times in history that the AAII weekly sentiment survey showed bears above 60%. When bears have growled in the past, exposure to stocks was in the 40s and exposure to cash was only slightly lower. Now, equity exposure is still in the 60s (and above the long-term average) and cash exposure is in the 20s.

Why It Matters: Sentiment extremes can be valuable contrarian indicators, but this can’t work as well if sentiment is divorced from positioning. If cash has not been accumulated as investors turn bearish, there is little to put to work when the crowd’s mood turns more hopeful.

In this week’s Sentiment Report we see plenty of evidence that investors are feeling pessimistic. We could be more constructive if those feelings had already been accompanied by...