What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So, let us know what it is… Buy, Sell, or Do Nothing?
Now, patience is warranted as demand begins to absorb the looming supply around these levels.
It'd be prudent to raise cash and take some profits off the table while Bitcoin is below 65,000. Below there, the downside risks remain elevated for now.
Key Takeaway: Risk On/Risk Off Ratio resolving higher. Commodity strength and bond weakness will have some looking for a new playbook. Breadth set up to lead.
Paying attention to relative strength can help in two ways. It identifies leaders, to whom active investors can tilt toward, and laggards, from whom those same investors can tilt away. Up and down the size scale, Energy and Financials are leaders, while Utilities, Health Care and Consumer Staples are laggards.
At the industry group level, mid-cap groups are seeing improving relative strength, while large-cap groups are seeing their relative strength deteriorate.
Welcomeback to our latest "Under The Hood" column, where we'll cover all the action for the week ended October 15, 2021. 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.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Intermarket Confirmation For Interest Rates
In recent weeks we have witnessed rates break above 1.40% and crude oil achieve its highest level since 2014. One of many missing pieces for the intermarket puzzle is the Copper/Gold ratio, which has been chopping sideways since risk assets peaked back in May. This week, we got an upward resolution, which suggests that base metals will continue to outperform precious metals. But it also suggests we’re entering an environment conducive to higher rates and higher prices for commodities, in general. This is a constructive pattern breakout that supports the global growth and reflation narratives.
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.
These are the registration details for our live conference call for Premium Members of All Star Charts.
This month’s Conference Call will be held on Tuesday October 19th at 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
There is more money being allocated to risk assets than there are risk assets to feed that demand.
It's not about the Fed, or the Trump or the COVID.
Prices go up when there's more demand than supply for assets. And that's what we see.
Here's exhibit A. Crude Oil is making new 7-year highs.
And why do you think that is happening? Is it because there's more supply of oil than there is demand for it? Or is it because there is more demand than supply?
You can complain about higher oil prices, or you can celebrate. You get a choice in this country.
Which one will you be?
I'd rather be celebrating with friends and family that we're all paying twice or even 3 times the price at the pump!
You can always check out the list of my favorite trade ideas here.
(While on vacation until Oct 26th, I’m going to be sharing some anecdotes on my favorite trading strategies: why I use them, when, and how I manage them once they are on.)
The majority of trades we do here with All Star Options tend to be directional in nature. And why not? We're leveraging best-in-class technical analysis to give us an uncommon edge to participate in emerging and/or continuing trends. And if we know anything as Traders, we know that if we have an edge, we should attempt to execute against that edge as often as possible.
Meanwhile, I recognize there is an entire cottage industry around "selling options premium" and for good reason -- it works! That doesn't mean it always works nor does it mean it's easy. I just don't like to make it my only thing.
That said, one of my favorite strategies is to sell premium via Short Strangles.
This week we’re looking at a long setup in the Financial and Metal sector. We're seeing new all-time highs in financial & metal sector indices and thought of taking a look at a stock that's ripe for a bullish move.
I agreed to give a presentation Saturday morning about Crypto Currencies.
But if you've seen me walk through my charts in the past, you know I have a hard time sticking to one asset class.
If we're talking about stocks, how can we do that without talking about the bond market?
If we're talking about Commodities, how can we have a serious conversation without including interest rates?
And if we're talking about Crypto Currencies, how can we not include the bank stocks with Crypto exposure, who are benefiting from both rising crypto prices AND rising interest rates?
Well, that's what happened Saturday morning.
A conversation that was supposed to be about Crypto, turns into an all out blitz of rising asset prices due to an asset shortage that we're seeing worldwide.
The reason risk assets are going up in price has nothing to do with the economy, or the federal reserve or who the president is....
We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
