In this weekly note, we highlight 10 of the most important charts or themes we’re currently seeing in asset classes around the world.
Bitcoin Bounces Back!
Bitcoin has been on an absolute tear, gaining roughly 25% since last week and booking seven consecutive up-days. Not only is price reclaiming its prior cycle highs from 2017, but momentum (as measured by the 14-day RSI) is registering its highest reading in two years. As shown in the table, price has also reclaimed its 200-day moving average, ending the second longest streak on record spent below it over the course of 2022.
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.
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.
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 $4B.
This index of 30 precious metal mining companies was the first of the Gold related stock indexes to break out. This was about a month after Gold Futures confirmed a buy signal for us in early October.
But of the "stock" related indexes, we look to the Phlx Gold & Silver Index as a leader. It certainly acts like one.
And do you know how I know it's not a downtrend?
Look at its components. Each column represents a different moving average ranging from the 5-day all the way to the 250-day. The further to the right the column sits, the longer the smoothing mechanism we used.
Green cells represent when the price of the stocks are above that particular moving average, and each of the 30 stocks are listed on the left side of the table:
Back in the late 1800s Charles H. Dow wrote down all of his Tenets about the market in the Wall Street Journal.
These articles ultimately became known as Dow Theory.
One of the basic tenets that many are familiar with is the confirmation of the Dow Jones Industrial Average and the Dow Jones Transportation Average (which was simply known as the Railroad Average when Charlie was around).
If one of the two indexes is making new highs and the other is rolling over, something is wrong, and the trend is likely changing.
Now, if one of the two indexes is making new lows within an ongoing downtrend, and the other is already putting in higher lows, that bullish divergence is evidence of a change in trend.
In the 4th quarter we saw the Phlx Gold & Silver Index ($XAU) break out above its key level, invalidating any bearish thesis that one could possibly have for Precious Metals.
You see all that resistance in the $XAU in 2013 and 2016, right around $110-113?
Well once we got back above that in November, it was time to start buying Gold & Silver stocks.
But where was the most popular ETF $GDX?
It was still below that overhead supply, as you can see in this chart below.
