From the Desk of Steve Strazza @Sstrazza.

Welcome back to Under the Hood, where we'll cover all the action for the week ended June 9, 2023. This report is published bi-weekly and rotated with The Minor Leaguers.

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.

Under the Hood is a value-add for investors of all kinds, as we can express our views through a variety of different types of stocks.

We use a variety of sources to generate the list of most popular names.

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.

From the Desk of Ian Culley @IanCulley

Gold can’t do all the heavy lifting.

I believe a generational rally for gold has already begun. But my structural outlook hinges on the former 2011 peak.

Gold must hold above that former high, marking the end of the previous secular bull run. 

It’s held this level so far. 

But if gold has any chance of printing new all-time highs as it has versus most major global currencies, it needs a little help from its friends…

From the Desk of Ian Culley @IanCulley

Commodities are caught in correction mode.

Copper has undercut former support. Crude oil is trading below its former cycle peak. And grain markets can’t catch a bid.

It’s not the most bullish behavior. But remember, price doesn’t travel in a straight line. 

On the bright side, most commodity contracts have stopped going down.

And the future will only become brighter for commodity and stock market bulls if buyers continue to bid up this next stock…

Check out Steel Dynamics $STLD, a $17B steel producer:

From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts

Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.

We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut. 

These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.

It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our orignal Hall of Famers list.

The beauty of these scans is really in their simplicity.

We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.

Based on the market environment, we can also flip the scan on its head and filter for weakness.

Let’s dive in and take a look at some of the most important stocks from around the world.

Here’s this week’s list:

From the Desk of Ian Culley @IanCulley

International credit spreads are contracting.

Investors are running from imminent global collapse by reaching for emerging market bonds over risk-free US Treasuries. 

Wait, perhaps I heard it wrong. 

It could have been a US economic collapse. 

Or was it the Chinese yuan replacing the US dollar as the world’s reserve currency?

Honestly, I don't pay much attention to the doom and gloom. (But I do find it amusing.)  

I’m not the only one ignoring the bad vibes.

The markets are also disregarding the fear mongers…

Check out the Emerging Bond ETF (EMB) versus the US Treasuries ETF (IEF) ratio overlaid with the S&P 500 ETF (SPY):

These two lines follow a similar path – a path currently driven by burgeoning risk appetite.

From the Desk of Steve Strazza @Sstrazza

Welcome to The 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B). 

Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn't just end there.

We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

From the Desk of Ian Culley @IanCulley

Petrocurrencies and crude oil futures are diverging.

The currencies that benefit most from higher oil prices refuse to roll with crude’s steady decline. 

Perhaps it’s more about the US dollar than a handful of currencies tied to oil’s supply and demand dynamic.

But with OPEC up to its old tricks again – Saudi Arabia announced deeper production cuts last weekend – the question arises…

Is crude oil due for a bounce?

Check out the overlay chart of our petrocurrency index and crude oil futures:

Crude oil posted a key pivot high a week after our index bottomed in late September. Since then, these markets have taken separate paths.

This is the video recording of our June 5th Monthly Charts Live Strategy Session

From the Desk of Ian Culley @IanCulley

What will it take for gold to make new all-time highs?

A weaker US dollar and falling real yields are likely candidates for leading catalysts.

We can also add a significant unwind in commercial positioning to the list. 

Meanwhile, it’s a range-bound mess.

Let's stick to the basics. Uptrends – at the core – come down to more buyers than sellers. And risk-on/risk-off intermarket ratios provide excellent tools for tracking whether bulls or bears dominate a particular market.

After the recent bout of selling pressure, one precious metal risk ratio is approaching a potential inflection point…

From the Desk of Steve Strazza @Sstrazza

Welcome to The Minor Leaguers.

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.

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.