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...

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.

Structural Damage For Smalls

Equities all around the world are having a brutal start to the summer as selling pressure spreads across the board. All of the US major averages are completing tops and registering new closing lows. 

The Small Cap Russell 2000 Index has been the weakest as IWM is currently testing a critical support zone at its 2018 and 2020 highs. We will be watching closely in the coming days to see how prices react to this area of former resistance turned support.

Bulls want to see this level hold. However, if price violates these former highs, we have to anticipate another leg lower and increased selling pressure for stocks more broadly. Seeing more and more risk assets fall back below their 2018 and 2020 highs is a big feather in the hat for bears. The S&P 500 is still about 7% above its 2020 highs of 3400.

...

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:

• This week, our macro universe continued lower again as 89% of our list closed in the red with a median return of -4.69%.
• The Volatility Index $VIX was the winner, closing with a 12.18% gain.
• The biggest loser was Dow Jones Utilities $DJU, with a weekly loss of -9.46%.
• There was a 7% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 4%.
• 9% of our macro list made fresh 4-...

How's the Bear Market treating you?

We're going on over 16 months of this so far, and counting....

Remember, stocks peaked in February of 2021, meaning that was the best things were for stocks during this cycle. And it's been a slow deterioration ever since.

The first stocks to peak are what we refer to as the "Culprits". Every bear market has that group that you can point to as the leaders to the downside.

We came into 2022 with a close eye on those Culprits (see here) and we've continued to monitor their declines.

If you haven't been following along, those groups include Chinese...

From the desk of Louis Sykes @haumicharts

Naturally, after a drawdown like the crypto markets have endured, this is the part of the cycle where everyone tries to call a bottom. Of course, we don't need to discuss the dangers of this treacherous journey of bottom-calling where many traders eventually meet their fate.

There is perhaps no worse setup for active traders than in environments like these.

Times like these are when volatility is rampant, emotions are elevated, and bad decisions are made.

But, there are two antidotes:

1. Don't trade, be patient, and buy when upward momentum returns.
2. Dollar cost-average in the value zones.

For the most part, we continue to hammer down the first point. Going back to December, we've been preaching patience and high cash positions.

But today, we want to address the potential credence in the notion of Bitcoin dollar-cost-averaging in the context of this recent selloff.

One of the arts of discretionary trading is practicing the ability to change our minds when facts or circumstances change.

We are not wed to following a rule rook.

There is no requirement to do "x" when "y" happens.

Of course, few discretionary traders succeed without some set of rules that are more like Best Practices. The rules may be fluid and change with market conditions, but there are almost always some guardrails in place. If for no other reason than to protect ourselves from ourselves.

The broad market selloff these past couple weeks has caused us to defensively roll a bunch of our short puts, which has eaten into our overall net positive cashflow. This will happen from time to time. But it definitely has spurred me to update my guardrails.

As the June monthly options cycle rolled off the board this past week, this makes July monthly options the "front month" options. As such, any new positions we'll be adding starting this coming week will be in the August monthly expiration series.

Since we'll be starting to roll out of our July options, I wanted to update you on how I likely see our current positions playing...

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.

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.

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

One of the most important risk ratios and easily the biggest snooze fest from the past year is finally starting to move. 

That’s right – after going nowhere for more than a year, the Copper/Gold ratio is making a directional move! And believe it or not, it’s resolving in the opposite direction of interest rates.

Instead of following rates higher, Copper/Gold is rolling over to the downside and raising questions regarding risk appetite and overall market health.

And from the looks of today’s price action, Dr. Copper is breaking down on an absolute basis as well.

We can’t emphasize the importance of these developments enough. We’ve been awaiting resolutions of these ranges since early last year, and it’s finally happening.

Let’s talk about it.

Here’s an overlay chart of the Copper/Gold ratio and Copper futures:

...

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 150 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.

The Hall of Famers is simple.

We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

*Click table to enlarge view

And here’s how we arrived at it:

• Filter out any stocks that are below their May 10th 2021 high...

This is the video recording of our June 17, 2022, Inside Scoop Weekly Strategy Session.

From the desk of Willie Delwiche.

Not sure where I first heard it, but I’ve always loved this saying: “Bull markets take you to levels you never thought you would see. Bear markets take you to levels you never thought you would see again.” Since the S&P 500 is now down more than 20% from its January peak, we are able to discuss bear market tendencies without getting the “yeah buts” from polite society. The S&P 500 is at levels not seen since late-2020, while the small-cap Russell 2000 is below its pre-COVID high back to where it was in early-2018. The Value Line Geometric index is also below its pre-COVID high and is at a level it first reached in early 2015. That is seven years of no progress for an index that serves as a proxy for the median stock.    

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

Now that inflation is no longer transitory and we’ve officially entered bear market territory, "recession" is the next buzzword on deck.

And don’t worry: Plenty of banter surrounding the yield curve will take center stage during all this recession talk. 

Somehow, an inverted yield curve has become synonymous with recession even though the historical record supporting this narrative leaves room for plenty of interpretation. 

The purpose of this post is not to present an argument on whether we’re already in a recession or if one is imminent. We’ll leave that up to the talking heads and economists.

Instead, we'll simply share where the yield curve is today and assess the likelihood of potential inversion.

Let’s take a look…

Here’s a triple-pane chart of the US 30-year, 10-year, and 5-year yields:

...

Taking losses is never fun. But it's the most important thing we do.

I wish it were different. I wish smart risk management was an exciting endeavor that made us happy. The kind of thing that makes us want to high-five our friends and adoring fans.

Unfortunately, it's more like that menial task that you have to do over and over again, hating every minute of it, but knowing it just has to be done (like the doing the dishes or laundry).

This is the video recording of our June 17, 2022, All Star Charts Crypto Weekly Strategy Session.

We've adjusted a position in the Paid-to-Play portfolio today:

William Griffith, director of Procore Technologies $PCOR, reported an additional purchase of roughly $7 million, as he continues to build his position in the stock.

Under Iconiq Strategic Partners II, he now owns about 44 million shares for a total ownership interest of 33%.

Time and again, we've been referring to how Nifty50 has been displaying more resilience compared to its international counterparts. While the Indian markets have come under heavy pressure this week, global markets have been reeling under that pressure for longer.

So today, we're here to provide a perspective of where the global indices are, just to get an idea of the kind of market environment we're in.

This is the video recording of the June 16th Weekly Town Hall w/ Willie Delwiche.

06/16/22 2:00 PM ET

It can be hard for traditional investors to gain appropriate exposure to crypto. There are many hurdles to jump and hoops to clear.

The Bitcoin futures ETF, launched late last year, is a step in the right direction. But isn't a perfect solution. Over time, futures ETFs are incredibly expensive, as the fund provider has to constantly roll over the contracts.

In an ideal world, US investors would have a Bitcoin spot ETF, which, of course, does not yet exist.

Another possibility is to skip the Bitcoin/cryptocurrency exposure and invest in crypto-related companies. That's certainly a viable solution.

From our work, we've found MicroStrategy $MSTR is, by far, the most fitting vehicle for those looking to gain exposure to Bitcoin via a traditional stock.

Other stocks, like mining and banking names, have their own idiosyncratic risks and drivers beyond crypto trends, making them less-than-ideal solutions for those seeking exposure solely to cryptocurrencies.

But beyond this is yet another solution.

How about crypto equity ETFs?

US investors have a few choices at their disposal...

From the desk of Willie Delwiche.

Last week, it was cool and rainy in Milwaukee. This week, it's been sunny and sweltering (with a few thunderstorms thrown in as well). Summer has definitely arrived as we approach the solstice and max daylight in the Northern Hemisphere.

With the heat we’ve had this week (several days in the 90s pushed our greenhouse temperatures to at least 120, which is as high as our thermometer measures), I've been sure to water the garden early and often.