From the desk of Willie Delwiche.
Follow the Flow (04-04-2022)
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.
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 (04-04-2022)
From the desk of Steve Strazza @Sstrazza.
Welcome back to our latest Under the Hood column, where we’ll cover all the action for the week ended April 1, 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.
[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.
A Warning From Banks
With risk-seeking behavior increasing, Financials and banks are lagging behind and not participating to the upside in a way we’d expect. The chart below is an equal-weight representation of the six largest banks in the US. This index can act as a leading indicator for financials more broadly. The fact that the index has not been able to hold the 2007 highs in an environment where rates are rising globally is a concern. Throughout history, you don’t tend to see bull markets without financials. These are the largest and most important financial institutions in the world. Bulls want to see them carve out a bottom here and catch higher along with other cyclical stocks. It should happen soon if it’s going to.
[PLUS] Weekly Market Notes & Breadth Trends
From the desk of Willie Delwiche.
Key Takeaway: Q1 returns reflect a bifurcated market. Weekly data shows breadth struggling for traction. Inflation-fighting proposals are political palliatives, not economic solutions.
We closed the book on Q1 last week and some of the stats are stunning:
- There was a 50 percentage point spread between the best performing sector (Energy) and the worst performing sector (Communication Services) in the quarter, the widest such gap in years.
- An even greater dispersion was seen between the best performing ACWI market in the quarter (Brazil) and the worst (Egypt).
- From an asset class perspective, commodities (+27%) posted their best gain in decades while bonds (-6%) experienced their worst loss in decades. The 60/40 (stock/bond) benchmark portfolio stumbled to one of its worst starts in the past quarter century, with both the stock and bond components weighing on portfolio returns.
- According to data from the Wall Street Journal, half of the S&P 500 (which is the combined weighting of the Technology, Consumer Discretionary and Communication Services sectors) fared worse than the Russian ruble, which was down 8.5% in the quarter.
Headspace
Where do you find your trading headspace?
How do you get to a place where you can immerse yourself in “the Zone” to think deeply about trades, strategies, strategizing, or new ways to approach risk management?
For me, far and away the best way to enter this zone is to go for a long walk – preferably in the mountains or in a forest. Just me, maybe my dog, and the sound of the wind whispering in the trees.
On Wednesday night, I returned from four days in the Redwoods National & State Parks of Northern California. Me and a friend hiked nearly 35 miles total.
I cannot begin to describe how amazingly beautiful this corner of the world is. It was my first time there. I took some pictures and videos, but it does not do it justice. You just cannot feel it the way you do when you’re standing amongst those towering Redwood trees and the deafening silence of the endless foggy forest washes over you. [Read more…]
An Interview With Trader Kimmy Sokoloff : Conversations with JC Parets
Today we sit down and chat with Professional Trader Kimmy Sokoloff.
I’m lucky to have known Kimmy for well over a decade, and we hit it off from the start.
Kimmy went through the CMT program in the 90s. And funny enough, volunteered later on with the CMT Association to grade Level 3 exams, which are mostly essays. We joke that she most likely graded mine in 2007-2008.
While I like to look out weeks and months for my timeframes, Kimmy focuses specifically on the hours and days. A 2 week trade for her is “Long-term”.
We’re both trained in similar ways, as CMT Charter holders. But our experiences are different.
Kimmy spent most of her career in Institutional Sales and Trading. She spent decades on the phones all day with huge funds.
So when Kimmy has something to say, we want to listen. I hope you enjoy this as much as I did.
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