Remember that Bitcoin crash in early December?
That was fun wasn’t it?
The comparisons to 1987 in the S&P500 were too similar to ignore. [Read more…]
Is the Yen Whispering “Buy”?
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
There’s been a subtle risk-on tone in recent weeks. With each passing day, it’s been spreading to more and more markets and charts.
Rates are rising around the globe. The underlying uptrend in commodities is intact and looks ready for another up leg. Our equal-weight commodity index is resolving higher from its current range. And cyclical stocks such as energy and financials are breaking out to new highs.
All of these events speak to a growing risk appetite and support higher prices for risk assets.
Although, two areas where we aren’t seeing such clear evidence that risk-seeking behavior is re-entering the market would be currencies and our intermarket ratios.
The AUD/JPY cross is still stuck within a range. High-yield bonds $HYG relative to their safer alternatives — US Treasuries $IEI — failed to hold their recent highs. And the copper/gold ratio is a hot mess.
We would expect to see decisive upside resolutions from these charts if investors are positioning for another leg higher.
This is not the case. At least, not yet.
But there is one forex cross that is hinting at higher prices for equities — specifically Japanese equities. That’s the USD/JPY.
Young Aristocrats (January 2022)
From the desk of Steve Strazza @Sstrazza
Dividend Aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for five to nine years.
We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money.” Imagine if years of consistent dividend growth and high momentum and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.
By adding our technical analysis to the mix, the Young Aristocrat setups give you the opportunity to own the best of the market’s future blue-chip winners before they become must-own household names.
Oftentimes, the strongest performers in this universe and even the Aristocrats themselves pay relatively small dividends. This is usually because the stock appreciation makes it tough to keep up with the payout — even for companies that consistently grow their yield in the double-digits! For this reason, we don’t have a minimum threshold for the dividend. What we’re really doing here is creating a list of quality stocks based on their ability to persistently grow their shareholder return.
And maybe the best part? This list is not just designed for long-term investors. Any kind of investor or trader can use this list as it helps generate ideas across all timeframes, even the short term. Remember, some of the most important filters we use for this list are momentum, relative strength, and proximity to new highs.
So, let’s keep it real: These stocks are going up across all time horizons.
Follow the Flow (01-10-2022)
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 direction and make them a pretty penny.
Then we flip through our list of stocks flashing unusual activity and pick the best setups using many of the same technical filters we do for our other scans. And just like that, we’ll follow the money flow and fatten our own pockets along with some of the world’s most powerful financial institutions.
Under the Hood (01-10-2021)
From the desk of Steve Strazza @Sstrazza.
Welcome to our latest Under the Hood column, where we’ll cover all the action for the week ended January 7, 2022. This report is published bi-weekly and rotated with our Minor Leaguers column.
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 activity, or simply our proprietary lists of trending tickers, there’s a lot of overlap.
[Options Premium] If You’re Bullish, This Pullback is a Gift
On days and weeks like this, I love to look for opportunities to sell premium into the elevated implied volatilities we’re seeing rising across the board. With $VIX back up above 20, you’d think there’s been plenty to pick from.
Problem is, I haven’t found any delta-neutral setups that look good today. Too many busted charts on the most liquid ETFs makes finding support levels that both make sense and offer enough premium to make it worthwhile from a safety standpoint hard to find.
So, as always, I reached out to my team from some other ideas.
We’ve been asking the question: “how bad can things be if we’re seeing this kind of relative and absolute strength in the banking and financial sectors?”
Steve Strazza served up an interesting bullish play that is either a gift of a pullback, or we’re buying the top. If you’re market the bullish, then you gotta believe this idea has merit. [Read more…]
Defensive Rotation or Just Rotation?
JC
Weekly Watchlist: Just Built Different
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