Blog - All Star Charts -

Healthy Sector Rotation?

October 6, 2023 by JC

One of the better indicators of a healthy bull market is when you see Consumer Discretionary stocks (the things we want) outperforming Consumer Staples stocks (the things we need).

The ratio between Discretionary and Staples is one we look at during bull markets, to confirm what the indexes are doing, as well as in bear markets to find divergences that may turn before the indexes themselves (see ’08-’09).

This really has been one of the more reliable indicators for many years.

And wouldn’t you know it, as pessimism spikes, volatility pops, and the permabears begin to pound their chest again, Discretionaries are putting in higher lows relative to Staples.

This is classic sector rotation we see during healthy market environments: [Read more…]

Las Vegas is an Excellent Short Premium Seller.

October 5, 2023 by Sean McLaughlin

There are no free lunches on Wall Street and certainly not in options trading.

It might be sexy to tell people that we’re “options premium sellers” and suggest that all we do is sell naked options that expire worthless – while keeping all the premiums for ourselves. Easy peasy.

But we know that’s not really how it works.

There’s a risk in holding naked short options. Our brokerage houses are keenly aware of these risks – and that’s why they require us to post margin in order to hold these positions. The margin protects the house. Mostly their house, but our houses too.

When a short options position goes against us, our brokerages need to ensure we have adequate buying power in our accounts to close the position and prevent further losses.

But just because we need to post a certain amount of dollars to hold a position doesn’t mean we should calculate our returns off of that number. That number doesn’t mean anything other than the fact that it’s the amount the house needs in order to be comfortable with us being naked short.

If we’re measuring our returns in naked short options trades based on our margin requirement, we’re going to be disappointed. We’re going to look at our possible gain in the trade and think to ourselves: “I’m risking $4000 to make $150? — that reward-to-risk math looks terribly skewed against me!” [Read more…]

Stocks Grapple With Bond Market Volatility

October 5, 2023 by Ian Culley

From the Desk of Ian Culley @IanCulley

Borrowing costs are increasing, and US Treasuries are tanking – again.

Everyone knows it. Even my therapist commented on interest rates and the “terrible” economy.

The 30-year T-bond has hit our initial target. And the 10-year is within striking distance.

So much for limited downside risk for the bond market. Perhaps the call for a 5.25 print on the 10-year yield by Christmas wasn’t aggressive at all.

But elevated yields aren’t the problem…

[Read more…]

[Options P2P] Adjustment to TLT Position

October 5, 2023 by Sean McLaughlin

We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]

World’s Biggest Trend?

October 5, 2023 by JC

This has to be one of the world’s most important trends right now. How could it not be?

You hear all this nonsense about the S&P493 and how it’s only 7 stocks going up.

But those are just lies. That’s not how the market works, and that is certainly not what’s been happening this year.

The real trend here is in the outperformance of the largest companies, particularly mega-cap growth, relative to other indexes with more diversified sector exposure and market-caps.

This is the Nasdaq100 making new all-time highs relative to the much broader Russell3000 Index: [Read more…]

The Short Report (10-04-2023)

October 4, 2023 by Alfonso Depablos

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 Hall of Famers, 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.