US Stock Market Indexes can be a funny thing. As investors we need to understand what's inside of them. Which stocks and sectors drive them higher or lower?

This seems like an afterthought in some circles, especially after the major large-cap indexes have put up nice returns the past 3 years. The S&P500, for example, was up 28%, 16% and 27% respectively in 2019, 2020 and 2021.

But at the individual stock level, it certainly didn't feel that way in many cases.

I have a good feeling 2022 will be the opposite. I think this year, the average and median stock has a higher likelihood to outperform the major indexes, for one simple reason.

No one owns a lot of these names.

We're buying an $MU June 100/125 Bull Call Spread for an approximately $6.50 debit. This means we’re long the 100 calls and short an equal amount of 125 calls

Check out our short video with the thought process behind these trades:

We debuted a new scan recently which goes by the name- All Star Momentum.

All Star Momentum is a brand new scan that guides us towards the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to outperform the market.

While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the strongest performers in our universe. These are the ones that are primed for an explosive move.

Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.

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

Downside pressure on long-duration rates and a flattening yield curve was the story of the bond market for the latter part of 2021. 

But we started to see signs that downside risks were easing in the final weeks of December. The 10- and 30-year yields made a nice kick save after undercutting their summer lows, and high yield bonds $HYG began to outperform safer alternatives like the Treasury bond ETF $IEI.

It seemed like the bond market was heading in the right direction – except for Treasury spreads. The 2s/10s spread was the missing piece of the puzzle, continuing to push toward new 52-week lows… 

Until now!

Only a couple of trading sessions into the new year, the bond market is providing plenty of fireworks. Rates are jumping higher across the curve, and critical treasury spreads such as 2s/10s, are following higher: 

...

From the desk of Willie Delwiche.

Key Takeaway: Year-end strength in stocks alleviated some of the concern that had crept into investors’ collective psyche. Short-term sentiment swings aside, investors remained positioned aggressively long stocks at a time when strategic risks remain high. December set a monthly record for equity ETF inflows and that price chasing pushed equity valuations to some of their highest levels on record. The optimism in positioning is not reflected in the sentiment surveys. But if the unwinding in the speculative bubble that peaked early last year gains steam, look for a lack of optimism to be replaced with outright pessimism, followed by a re-positioning of assets.

Sentiment Report Chart of the Week: Commodities soar but struggle for attention

After a relative lull around mid-year, equity ETF inflows intensified as 2021 came to a close. A record $90 billion flowed into equity ETFs in December and pushed the total for the year above $650 billion.  Commodities continue to...

If this blog post was served up to you when you were searching for the latest scare porn on the omicron covid pandemic, I'm sorry to disappoint. But if you'd like to draw a correlation between the rising omicron cases and rising share prices of Micron technology stock --- you wouldn't be the first person to commit a #ChartCrime in service of a good story.

Micron Technology $MU is a stock that's been on my radar since the team published the Under the Hood report around Christmas highlighting the setup.

Here's what they had to say:

From the desk of Steve Strazza @Sstrazza

We held our January Monthly Strategy Session Monday night. Premium Members can access and re-watch 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 Steven Strazza @Sstrazza and Ian Culley @IanCulley

The rally in the US Dollar Index $DXY is stalling out.

With each passing day, dollar internals are weakening, and the prospect of a bullish resolution from the current continuation pattern in DXY is diminishing. We expect these patterns to resolve quickly. And when they don’t, that’s information.

Some other things worth noting are that commercial hedgers hold a large short position in DXY futures and the near-term bearish trend for individual dollar crosses is expanding (up 20% from last week to a staggering 80%).

The bottom line is evidence continues to stack against the USD.

With that as our backdrop, let’s check in on a long USD trade that was triggered in November and outline how we want to navigate the coming days and weeks.

Toward the end of the year, we covered a couple of key levels that the dollar needed to clear to increase our conviction in its current...

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

From the desk of Willie Delwiche.

Until now, the answer to the Growth vs Value question has depended on what type of market cap conversation you're having.

Through the end of 2021 Large-cap Growth was still a leader. It was the Small-cap Growth stocks that had been crushed most of the year, particularly when compared to the performance of Small-cap Value.

You can see the new 52-week lows in IWO / IWN coming into 2022:

In yesterday's note, we pointed to the growing leverage in derivative markets, explaining that we anticipate it unwinding in coming weeks.

Since we published it, we've seen an aggressive "sell" wall placed on FTX, the world's third-largest derivatives exchange by open value.

This caused Bitcoin to sell off and created a clear zone of supply.

On the other hand, Bitfinex, one of the most prominent spot exchanges, has a monster "buy" wall placed just under current market prices.

FTX and Bitfinex are experiencing significant order book activity, and there are now monster walls placed on either side of market prices.

Additionally, we've seen yet another uptick in open interest to all-time highs in a context where price stability is at a local peak and Deribit implied volatility is progressing down to its lowest value since April....

This is the video recording of our January 3rd Monthly Charts Live Strategy Session

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

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

We recently decided to expand our universe to include some mid-caps…

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new 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...

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...

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.

Continuation Patterns And Primary Uptrends

As we enter the new year, let’s take a step back and discuss where we’ve come from. The following chart is an excellent illustration of the price action for risk assets in 2021. As you can see, both stocks and commodities went through a corrective phase for much of the year and remain stuck in their ranges as we head into 2022. Markets can't go sideways forever, so we expect resolutions sooner rather than later. And because the vast majority of these consolidations are simply continuation patterns within the context of primary uptrends, we’re expecting upside resolutions. The question simply remains “when?”

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:

• Our macro universe was green this week as 72% of our list closed higher with a median return of 0.52%.
• This week, Lumber $LB was the winner, closing with a 9.07% gain.
• The biggest loser was the Volatility index $VIX, with a weekly loss of -4.12%.
• There was a 2% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 55%.
• 57% of our sector list made fresh 4-week highs, 21% made...

From the desk of Willie Delwiche.

Key Takeaway: Large-caps take the 2021 crown as mid-caps & small-caps struggle to get back in gear. US strength not being echoed among global equities. Tactical risk management model gives benefit of the doubt to bulls.

• Entering 2022, Real Estate, Technology, Health Care and Consumer Staples hold down the top spots in our S&P 500 sector relative strength rankings.
• Our industry group-based heat map shows deteriorating conditions across Energy and Financials and improving conditions in Staples and Utilities. Leadership from defensive groups is not usually consistent with risk-on behavior.