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[Options] Putting the Offense on the Field

January 11, 2023

With the NFL Playoffs getting underway this weekend (Go Bills!), it's time we put the offense on the field!

I was kicking around a bullish idea in a consumer staples name during our Analyst meeting today. The chart looks great. The setup is good. We can position for a nice potential reward versus the risk we'd incur to put the trade on. Everyone agreed that its probably a good trade.

But... is it aggressive enough?

Answer: No, it's not.

The thinking that emerged from our chat was that risk is back on in the stock market; therefore, we need to get into the most reasonably aggressive names we can. And one of the areas where risk is most definitely "on" is in the homebuilders sector.

If all we did was watch the evening news or listen to the inflation and interest rate scaremongers, we'd reasonably conclude that a long-term and painful bear market for real estate and housing in particular is a slam dunk. No contest.

If a severe real estate bear market was in the cards, would we be seeing homebuilders ripping of their recent lows the way we have over the past couple of months?

[PLUS] Weekly Sentiment Report: Investors Confront Unfamiliar Weakness

January 11, 2023

From the desk of Willie Delwiche.

Over the course of 2022, the two-year (8-quarter) return for the aggregate household portfolio dropped from one of the highest levels in over 40 years to underwater for the first time in over a decade.     

Why It Matters: Sentiment soured in 2022 but investors largely stuck with their equity exposure. They choose not to meaningfully increase their exposure to bonds or cash (and commodity funds actually experienced outflows last year). Now investors are reviewing portfolios that didn’t just experience a bad year, but are actually down over the past two years. This is unfamiliar territory for a generation of investors who are not used to sustained weakness and who see US large-cap equities as the only game in town. 

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The Euro Has the Answer

January 11, 2023

From the Desk of Ian Culley @IanCulley

Is the dollar going to finally bounce?

As I pointed out last week, if there was ever a place or time – it's’ now! But that doesn’t mean it’ll happen…. 

One thing is certain: The markets don’t care what I think. This includes the US dollar.

But when I look at a chart of the EUR/USD, the largest component of the US Dollar Index $DXY, it’s running into a logical level of resistance.

How the euro reacts to current levels will set the tone for the dollar in the coming weeks and months.

Check out the daily chart of the EUR/USD:

Wellington Management Quadruples Its SNDX Interest

January 11, 2023

The only Form 4 on today’s list was filed by the chairman and CEO of Erasca $ERAS, who revealed a purchase of $231,420.

Aequim Alternative Investments filed a 13G reporting a passive ownership stake of just over 5% in the oil & gas explorer, Chesapeake Energy $CHK.

Industrials Continue To Lead Stocks Higher

January 11, 2023

Historically, Industrial stocks are the ones with the highest positive correlation with the overall market, among all the S&P sectors.

Financials are obviously important. We don't have bull markets around here without them.

Technology has also been important, considering it has the highest weighting among all the sectors in the U.S.

But when you run the numbers, it's actually Industrials that comes out on top.

Industrials are officially the market's most important sector.

And so when we take a look at how they're behaving, I'm still not seeing the weakness that most investors keep telling me is coming.

In fact, look at Industrials breaking out to new multi-year highs relative to the rest of the market:

Recipe for Better Sleep: Lower Volatility + Higher Returns

January 10, 2023

In the Spring of 2022, JC came to me and said: “What do you think about managing an options income portfolio for me? I’m looking for some more strategy diversification in my portfolios. It doesn’t need to be anything sexy, just steady.”

Ok, I’m probably paraphrasing a bit, but that was the gist of his ask.

So I got to work on putting a plan together for him. When we looked at it together, it became obvious that we should offer this portfolio to the All Star Charts community who might also be interested in some further diversification. Even if people don’t take our trades, it could be a productive learning experience for everyone.

So we got to work and we launched the All Star Options Paid-to-Play (P2P) service in May 2022.

Each trading day, we either enter a new delta-neutral options credit spread in a liquid ETF (from a list of the most liquid Index and Sectors ETFs), or we play defense on an open position with an adjustment to put us in a better position to win. And we leave resting GTC (good-till-canceled) limit orders to close our credit spreads at profit targets which get filled periodically at the whim of the markets.

[PLUS] Dynamic Portfolio Management

January 10, 2023

From the desk of Willie Delwiche.

Dynamic Portfolio Update: Our portfolios held up well in 2022. Now we are making some changes to remain well-positioned for the trends that are intact as we begin a new year. We've re-allocated equity exposure away from the US and toward areas around the world (both regions and countries) that are showing leadership while also making room in the portfolios to take advantage of the strength coming from precious metals.

Options Paid to Play

[Options P2P] Year 2022 Portfolio Performance

January 10, 2023

Thank you to everyone who has been participating, engaging with, and learning from the All Star Options Paid-to-Play offering.

I sincerely hope that in addition to watching me trade this portfolio, you have gained both financially and educationally during this continuing journey together.

It was a challenging year for many equities investors. Yet we enjoyed smoother returns and a better (and positive!) end result – what’s not to love about that?

We launched this portfolio on May 11th, 2022, and here is our abbreviated calendar year 2022 Performance with an overlay versus the S&P 500: