Late last week, Speaker of the House Nancy Pelosi reported the purchase of a variety of deep in-the-money call options in Apple $AAPL and Microsoft $MSFT.

The contracts expire in March and June of next year.

Over the past few years, Pelosi has made some very profitable trades using in-the-money calls in names such as Tesla $TSLA and Nvidia $NVDA.

There are a handful of stocks that are displaying signs of early strength as the market moves sideways. Today we're going to look at one such stock from the Financial Services sector.

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.

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.

For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.

That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.

We expanded our universe to include some mid-caps.

To make the cut for our 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 ADRs in our universe.

The same price and liquidity filters are applied. Then, as always, we sort by proximity...

Key Takeaway:

• Yields pause, but trends are still higher.
• Sector leadership is providing little support for the indexes.
• New lows collapse but new highs are scarce.

To put it another way: even after the 60+% rally in XLE (Energy ETF) this year and broad weakness elsewhere, there are still three individual companies (AAPL,...

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...

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.

The Impact of a Higher Dollar

We’ve talked a lot about the implications of a higher dollar. Long story short, it means lower prices for risk assets. This includes US stocks, commodities, and especially international stocks. They should all enjoy a tailwind if the dollar is to fail and roll over at these former highs.  

Overlaying growth stocks such as the ARK Innovation ETF with the Dollar Index gives us a nice visual of this relationship. Look at the large base in DXY that has formed since its 2020 peak. If we were to invert that DXY chart it would fit seamlessly with the distribution pattern in ARKK, shown below. The two have a very strong negative correlation. 

As the dollar has rallied since last year, ARKK and other stocks have come under increasing pressure. Along those same lines, if the dollar were to top out and start trending lower from here, wouldn’t this make for a logical level for ARKK...

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 was mostly red as 77% of our list closed lower with a median return of -0.85%.
• The US 10-Year Yield $TNX was the winner this week, closing with a 7.80% gain.
• The biggest loser was Lumber $LB, with a weekly loss of -10.33%.
• There was a 4% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 15%.
• 15% of our macro list made fresh 4-week highs....

With everyone so certain about the upcoming recession, even Cardi B, why don't we take a step back and look at what the actual prices of stocks are doing.

You can see here that the Dow Jones Industrials and Dow Jones Transports have done absolutely nothing for over a year.

For perspective, stocks first peaked in January of 2018, then went nowhere for 3 years, and finally broke out:

We go where the strength is.

And until new information presents itself to get us looking elsewhere, the strongest names, best bases, and most impressive relative strength continue to be found in the energy space. Who am I to fight the facts?

Today's trade is in an Oil & Gas company that has been in an unrelenting uptrend since mid-2020 that is showing no signs of reversing.

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

Crypto markets appear to be stabilizing in the aftermath of the Terra $LUNA crash, with Bitcoin $BTC slowly progressing to the low 30,000s. Many altcoins are pressing down on critical support levels.

As we'll cover in tomorrow's note, many are well-defined for long-taking opportunities if the conditions arise.

But looks can often be deceiving.

We're still placing a high weighting that near-term price action will involve a high concentration of whipsaws. This appears to be a "fade the breakouts" type of environment.

This is all taking place within the context of Bitcoin resting on macro support of around 30,000.

All in all, we have a neutral bias for the weeks ahead. But, zooming out, this would be a logical area to see Bitcoin and the others bounce over longer time frames.

From the desk of Steve Strazza @Sstrazza

We held our June Monthly Strategy Session last Thursday night. Premium Members can click here to access the recording and the chartbook.

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.

Last week, Carl Icahn filed a 13D revealing an ownership position of 5,089,703 shares in the natural gas services company Southwest Gas Holdings $SWX.

Icahn first purchased the stock in the second half of 2021. After a recent acquisition of an additional 2 million shares, Icahn’s total interest is 7.6%.

From the desk of Steve Strazza @Sstrazza

From a technical perspective, this rocky market is offering us limited opportunities on the long side.

While we continue to approach most equities with caution, insiders are buying into the volatility aggressively. According to data from Whalewisdom, the ratio of insider buys versus sales hasn’t been this high since early 2020. 

While this is bullish, we still aren’t seeing much in terms of price confirmation.

Something we are seeing is plenty of options to choose from on our Inside Scoop list. 

But while insiders are buying hand over first, the current environment warrants us to be far more selective. We only want to be in those setups that are offering the best risk/reward opportunities. 

This week, we have our eyes on a mid-cap materials name that is coiling just beneath all-time highs. 

The troubles don't stop coming for investors who were deceived into believing that gold was a hedge against inflation.

Gold is at the same price it was 2 years ago.

Heck, Gold is still at the same price it was 11 years ago.

Meanwhile, Silver is down 40% from that same point.

Inflation hedge?

Nothing could be further from the truth.

Look how gold and silver are doing relative to actual inflation hedges:

A lot of the worst investors I know and people who I regularly like to bet against are preparing for a recession.

Are you?

I've always been in the camp that recessions are the economic implications of changes in asset prices.

And that's because, well, it's just fact. Price leads. The "economy" follows....

So for me, I'd rather just focus on price then. Why would I waste time on the lagging data when we can spend our time on the forward looking data?

And so here we are.

What's it going to take for stock prices (outside of energy) to stop falling?

I think it's more of what we've seen over the past few weeks: A weaker Dollar.

We're looking at new 7-year highs for the Energy Sector Index Fund.

How many stocks and ETFs in America do you think are doing that?

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.

It's Monthly Charts time!

It's that time of the month when we zoom out and look at the bigger picture (seems like a good time to do that, don't you think?) The market has been trying to make sense of the trend, so let's try and do that as well, shall we?