Even though stocks have broadly advanced on the first two trading days of October and Q4, today's market action reminds players that stocks are still risky here and the options market continues to price in this fear in the form of higher than normal options premiums.
As such, the odds favor net premium sellers in these conditions -- so that's what we're on the hunt for.
Ideal setups are ones in which a nearby support level has revealed itself so we can lean against it for risk management purposes.
One such setup can be found in Brookfield Asset Management, $BAM:
There's been no denying the importance of the US dollar when it comes to evaluating risk appetite.
It's been clear -- the dollar has been the safe haven.
Not gold.
Not the yen.
Certainly not bonds.
When the dollar has been strong, crypto and equities have been pressured, and vice versa when the dollar's eased off.
Just look at the last few sessions of trading: The dollar sold off, and equities quickly got back above their June lows, putting in a failed breakdown.
In fact, it's not just the broad indices putting in these failed moves. There are ton of whipsaws out there this week.
One, in particular, that's caught our interest is gold.
After running the stops below this support level, gold finds itself back in the high time frame range.
We can't say it enough: We love these setups. They're among the highest-conviction, highest-probability, and greatest momentum setups to trade -- all factors traders dream of.
In essence, when price undercuts its former lows, stop-losses get hit and...
The stock we're looking at this week is part of the Chemicals sector. These are stocks that are displaying strength on an absolute and relative basis. And that's exactly what we're looking for!
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.
The US dollar has been under pressure for the past five days, and investors are dancing in the streets.
I get it. A weaker dollar sits at the top of every stock market bull’s wish list. When the dollar goes down, stocks tend to go up. But don’t forget – betting against the dollar has only brought pain this year.
So, instead of joining the celebrations, I nailed down a clear-cut strategy for selling dollar weakness.
Spoiler Alert: Early sell signals are already starting to fire!
TheScales are tipped toward risk and away from opportunity.
A challenging macro backdrop is weighing on the market and unsustained rally attempts have kept Breadth and Trends & Momentum from joining Sentiment as reasons to look for opportunity.
Our Weight of the Evidence Dashboard fills in the details and includes a few high-level charts that we are watching as we head into the 2022 homestretch.
It's piqued our curiosity to see crypto volatility dampen while risk markets have continued to sell off in recent weeks. This comes as equities lost their June lows, where downside volatility looked poised to follow through.
But, this week, risk appetite has shown a completely different face.
The S&P 500 is back above the lows, putting in a failed breakdown.
What's more is that both Ethereum and Bitcoin have risen in conjunction with equities, supporting the case that the conditions for a countertrend rally have been set.
The most significant insider activity on today’s list was reported in a series of Form 4 filings by Greg Abel, the vice-chairman of Berkshire Hathaway $BRK.
Abel reported purchases worth roughly $68 million in Berkshire’s class A shares.
The transactions help to align the executive more closely with shareholders as he prepares to take the reins of the company at some point in the future.
Welcome back to Under the Hood, where we're covering all the action for the week ended September 30, 2022. This report is published bi-weekly and rotated with The Minor Leaguers.
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 that are seeing an unusual increase in investor interest.
Watch this video for a behind-the-scenes look at our process.
Whether we’re measuring increasing interest based on large institutional purchases, unusual options...