Dynamic Portfolio Update: This year’s rally has so far failed to turn long-term trends higher and is starting to look ragged. As we see how this period of digestion plays out, we are reducing the equity exposure in our Tactical Opportunity Portfolio.
[PLUS] Portfolio Perspectives – Keep Commodities In The Conversation
Moving into commodities when they are trending higher versus stocks increases return and lowers risk relative to otherwise static equity exposure. Commodities may not always earn a spot in our portfolios, but we do well to remember to include them in the asset allocation conversation.
Why It Matters: Commodities can go nowhere for years on an absolute and relative basis. 90% of the time from 2012 through 2020, the CRB index was in a downtrend relative to the S&P 500. During that time period commodities got the reduced portfolio exposure that they deserved. In many cases they got dropped from the conversation all together. Commodity leadership of the last couple of years revealed that to be short-sighted. With commodities cooling off and stocks again getting the upper hand on a relative basis, we can reduce our exposure, but let’s not exclude them from the conversation. As long as an asset has a seat at the table, we can choose to minimize our exposure to it. But it is difficult to have exposure to an area that isn’t even discussed. Investors benefit when commodities are kept in the conversation even if that doesn’t result in portfolio exposure.
Inside we take a Deeper Look at commodity trends over time, how they have provided portfolio ballast of late and why that could be changing going forward.
The Minor Leaguers (02-27-2023)
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 to new highs in order to focus on the best players.
But, instead of all-time highs, we’re sorting by 52-week highs these days, as we don’t want to discriminate against energy or other cyclical stocks.
The goal is still to catch the strongest names while they’re small and have serious upside potential. If any of these stocks ever climb the ranks to the big leagues, the returns could be huge.
We’re looking at up to 10x moves just to break into large-cap land!
Let’s dive into this week’s report and see what’s happening in some of the hottest stocks in the Minor Leagues.
Follow the Flow (02-27-2023)
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
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.
[PLUS] Weekly Momentum Report & Takeaways
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.
[PLUS] Weekly Top 10 Report
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.
Tactical Levels for the S&P
The S&P 500 is bouncing off the 38.2% retracement of its rally from the October lows. This level also coincides with the AVWAP from 2022 lows, making it a confluence zone of support to halt the recent selling pressure.
[Video] Gold Rush: Silver Tells a Cautionary Tale
Silver futures slide to multi-month lows, undercutting a critical shelf of former support.
Regardless, we believe precious metals and their related stocks ultimately resolve higher, printing fresh all-time highs.
But before we can put money behind this bullish thesis, interest rates and the US dollar need to stop rising.
Check it out: [Read more…]
Play It Tight: Safe Conduct as Silver Drops
From the Desk of Ian Culley @IanCulley
Silver futures have undercut a critical shelf of former lows.
I find it difficult to hold a bullish bias for precious metals and mining stocks, at least from a tactical perspective.
And when I zoom out to longer time frames, overhead supply looms large across the entire space.
Understand, I believe precious metals and their related stocks ultimately resolve higher, printing fresh all-time highs.
But before we can put money behind this bullish thesis, these next three charts need to throw it in reverse…
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