The question I keep seeing goes something like this: "Will all this weak breadth finally cause a correction in the market?"

But the right question to ask isn't whether or not a correction is going to start.

It should be: "How much longer will this correction go on?"

As markets have gotten choppy lately, I've been on the hunt for more bearish and neutral trades to help balance out my predominantly long portfolio.

In this week's Follow the Flow report, Steve Strazza teed up a nice candidate for some downside exposure. The beauty is, the Options Gods are lining it up such that we can affordably take an aggressively bearish position that will pay off nicely if it works, while limiting our risk if we're wrong.

Bulls have certainly given the bears a run for their money this last week.

Bitcoin's on the verge of eight consecutive positive days...

That's impressive.

Don't just take our word for it, look out how rare events of this magnitude have been, as marked by the green arrows:

The market has moved into a sideways trading range again. Post making new highs Nifty has traded sideways for over a month now.

While the Indian market has displayed a great deal of resilience compared to other markets, we're yet to see positive breadth thrusts and moves.

Let's take a look at what the breadth analysis is pointing at, given the current market setup.

From the desk of Willie Delwiche.

Key takeaway: Optimism most likely peaked earlier this year, as options activity and equity exposure have continued to trend lower in recent months. Yet, our sentiment indicators show no signs of fear. Of course, it’s hard to imagine an environment plagued by fear when the S&P 500 and Nasdaq push to new highs. However, when we look beneath the surface new highs contract while new lows expand. It seems each day a new bearish divergence in breadth emerges, adding to the fragility and deterioration of an already shaky foundation. Without a supportive backdrop, a price correction or volatility event could lead to a meaningful unwind in sentiment.  

Sentiment Report Chart of the Week: New Highs?

The S&P 500 and the NASDAQ made new highs last week but looking beneath the surface tells a different story. There were as many stocks making new lows as new highs last week. Between the NYSE and NASDAQ, the new...

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

The current market environment demands that we adhere to our risk management protocols as strictly as ever.

It’s a mess out there!

And with each passing day, more and more signs point to these challenging conditions persisting.

There is one data point in particular that we believe is likely to remain a serious headwind for risk assets: continued strength from the US Dollar.

We’ve covered this theme in detail the past couple of months as USD has rebounded against just about every major currency we track.

As always, we will continue to monitor the dollar as it is a vital piece to the intermarket puzzle.

Put simply, when investors are seeking safety in the dollar, it’s usually happening in an environment where stocks are under pressure.

Last week, we highlighted the violation of a key pivot low in our...

There's a permeating myth that altcoins need to outperform Bitcoin for there to be a healthy bull market.

You'll often hear claims like "the Ethereum/Bitcoin ratio is making new lows, so the market can't go up."

A similar notion gets thrown in the stock market, that if equal-weight S&P 500 is underperforming its cap-weight counterpart, breadth is said to be "unhealthy".

Though, we've found that to be far from the truth.

In the case of crypto, there have been countless times where the relative leadership has not been in the altcoins, but yet the asset class did just fine.

Just a few short quarters ago, before the alt season kicked off earlier this year, Bitcoin was outperforming nearly every other major coin as seen by the continued progress in its market-cap dominance:

This is simply calculated by evaluating what percentage of the total cryptocurrency market-cap Bitcoin represents. So when this...

Key Takeaway: Indexes at new highs as new high list contracts and new lows expand. Real bond yields drop to their lowest level on record. Prices are rising as the path for growth becomes more uneven. 

• Communication Services and Real Estate swapped places near the top of our relative strength rankings for the S&P 500. While Real Estate strength persists through the equal-weight version of the rankings and down the market cap scale, Communication Services relative strength appears to be more selective.
• Our industry group heat map reflects recent strength among large-cap groups and relative weakness from the mid-cap and small-cap areas of the market.

From the desk of Steve Strazza @sstrazza

This is one of our favorite bottoms-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… and 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...

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 July 23, 2021. This report is published bi-weekly and rotated on-and-off 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"...

The team pumped out the Saturday Chartoons letter this weekend and as always, there were some nuggets of wisdom and ideas to be found therein.

The tone overall is: we're in a tricky spot here. There are some stocks going up, many stocks going down. But in sum, we're kinda stuck in the mud here for a little bit, it appears.

Of course, if this continues for a bit, then we'll want to keep our eyes out for more delta-neutral credit spreads to add to our portfolio.

There's one sector ETF that was specifically highlighted in this weekend's letter that fits the criteria I look for.

It's fair to say that bulls scored some points in the last few days, with Bitcoin moving back up to the upper 30,000's.

Throughout this recent rally, it was pretty clear that there was a lot of squeeze-action going on, as over $900M in Bitcoin shorts were liquidated in the last 24-hours...

Or as we like to say around here, from failed moves come fast moves in the opposite direction:

Just take a look at momentum registering its highest reading since April, following that notable bullish divergence...

It's also constructive to see Ethereum holding its head above 2,250, which is been a critical long-term level:

Seeing buyers dig in where they needed to is a great sign of much-needed progress for this beaten-up asset class.

But, there's still work to be done.

Particularly in the short term, Bitcoin is still trapped beneath...