Traders woke up Monday morning to a little reminder that volatility happens.

It certainly wasn't a calamity, but it was a larger gap down opening than we've seen in a while, following an ugly close on Friday which certainly has put some traders on edge.

When these types of conditions arise, we often see implied volatility priced into options rise to meet these increasing levels of fear. And today is no exception. On days like today, I like to peruse the list of active ETFs and see if any elevated implied volatilities are offering up a good income trade candidate.

The one that tops my list also has a nice risk management level we can lean against.

You often hear in the stock market that "Cash is King."

Of course, in the world of Crypto and DeFi, it could be said that "Tether is King".

There's a lot of big players in other asset classes, that as part of their mandate, can't sit in cash. The majority of investors, particularly in this space, do have that option. So why not use it?

You’re going to see a lot of the crypto community advise against cash. “Market sell-offs are an opportunity to buy more at lower levels”, they say. “You’re not disciplined or smart enough to get back in”, they preach. "Just HODL and diamond hands, bro".

It’s all based on this meme that the market always goes up. I guess if you trust data based on the tiny sample sizes that we have in this young asset class, you’ll believe anything.

But ultimately, the point of the matter is that there's no real directional bias right now.

Market tops are a process. They just don't happen overnight like the headlines would often have you believe.

You're seeing stuff like this today: "Dow futures tumble 300 points on worries over rising COVID-19 cases"

And people actually believe it. Heck, even the headline writer probably believes it.

But if you've been following along here, where we track the actual facts, stocks peaked back in February, and that was confirmed in March. 

The Nasdaq new highs list peaked on February 8th. And the Nasdaq Advance-Decline line peaked the very next day on February 9th.

That same week US Small-caps and Micro-caps decided to stop going up as well: 

We've been seeing some strength in the Realty sector over the past couple of weeks. So this week we're taking a look at a long setup in Realty itself.

Let's see what we have today.

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.

From the desk of Steve Strazza @Sstrazza

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 context of the big picture 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.

• There was broad weakness from risk assets in our macro universe this week as 66% of our list closed lower with a median return of -0.74%.
• The Volatility Index $VIX was the big winner, closing out the week with more than a 14% gain.
• The biggest loser again this week was Lumber, with another massive loss of -23.64%
• Emerging Bonds $EMB posted a bullish reversal weekly candle.
...

From the desk of Steve Strazza @Sstrazza

Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Markets have been unequivocally choppy. Breakouts are failing, new highs are dwindling, and it’s becoming more challenging to find trending opportunities. Last week, we discussed how Semiconductors failed to breakout, and asked whether its peer industries would follow suit. Well, we have our answer now… One of the strongest industry groups in the last two months, Internet, just printed a failed breakout at its February highs. Software looks frighteningly similar.

Digging into some of the components, Amazon, the largest weighting of the group, is in the process of retesting its September 2020 highs of 3550. And to compare the industry group to one of its peers, Semiconductors have also put in a failed breakout. 

When even the leaders of the market can’t catch a sustained bid and hold new highs, we’re usually in an environment where stocks in general are struggling. And they are. If we’re...

This is the video recording of our July 16th, 2021 All Star Charts Crypto Weekly Strategy Session.

It's Saturday Morning Chartoons time. 

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

I've also promised you guys that I would do my best to highlight the work of some of my friends who I think do a good job of analyzing markets. 

So today I want to show you a seasonal chart from Ari Wald, Head of Technical Analysis at Oppenheimer.

The main chart represents the US Presidential Cycle peaking in the 3rd quarter of Post-Election years. That's this quarter.

Click Chart to Zoom in

On the lower right, Ari did a nice job of showing the annual seasonal cycle going back 30 years. This one peaked yesterday, July 16th. 

We've discussed the deteriorating market breadth. We've talked about the Intermarket relationships all rolling over, particularly in the bond market and currency markets. And sentiment-wise, there simply aren't any bears...

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

One of the main themes we discussed in the Q3 Playbook we published last week is the lack of any directional bias for equities on a relative basis.

We’ve been obnoxious about the trendless environment for equities on an absolute basis... and now we’re noticing a lot of the same play out in many of the relative trends we monitor.

When there is no edge on absolute terms, we can at least try and generate alpha by taking advantage of relative trends through pair trades.

But, right now there’s really nothing out there giving us an opportunity to do so. This is about as rough of an environment for money managers as you’ll find.

All we see is sideways, sloppy, range-bound action… Standard year-two stuff!

To illustrate what we mean, let's take a look at each large-cap sector SPDR relative to the S&P.

We'll start with the “growthy” sectors.

Technology relative to the S&P 500 has been a sideways mess for the past 10...

The good folks at Stockcharts.com put together a fun panel and asked each of us to bring 2 charts: Which one tells the story of the first half the best? And which chart am I watching most as we head into the second half?

I've been friends with Jay Woods for a long time and I'm now getting to know John Kosar's work, and I can tell you these are some smart dudes. You want to listen to what these guys have to say.

Enjoy!

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

Opportunities are springing up in the commodity space!

Yes, energy, base metals, and (especially) precious metals continue to consolidate below overhead supply.

But this doesn’t necessarily speak to weakness… 

In fact, much of the sideways chop in commodities is taking place at logical levels of resistance. And aside from the dramatic sell-off in lumber, we see more upside resolutions than violations of critical support levels.

We recently pointed out that base metals managed to hang tough in the face of a significant correction in copper. And this week, tin is breaking out to new all-time highs.

...