Following Bitcoin's bounce back these last few days after some sustained selling, there's plenty of failed breakdowns out there in the Crypto space right now.

Frequent readers of ours know just how much we love these setups:

In essence, when price undercuts its former lows, stop losses get hit, and longs throw in the towel. At the same time, bears heavily jump in and enter short.

Then as the market begins to rally back above those former lows, shorts are now underwater, and they're forced to cover. While they're buying back their positions to unwind the trade, longs see price on a tear higher and fold into buying back their old position. Momentum traders see these gains and jump on the bandwagon too, forcing even more shorts to cover.

Long story short, it creates a positive feedback loop that can propel price significantly higher.

It's why we love this pattern so much around here.

Looking through our Chartbooks today, we...

For me the Small-caps really tell the story.

Curious what the past 4+ months have been like being long equities?

It looks a lot like this:

We held our June Monthly Conference Call on 22nd which our Premium Members can access and rewatch here.

In this post, we'll share five of the most important charts along with JC's commentary of them and a brief explanation for each.

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Something we’ve been working on internally is using various 'bottoms-up' tools and scans to complement our top-down approach.

One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small, to mid, to large - and ultimately mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B) they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market as that is typically where these potential 50-baggers come from.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… all would have been on this list at some point during their journey to becoming the market...

From the desk of Willie Delwiche.

Key Takeaways:

• Investors are optimistic, but momentum isn’t confirming price strength
• While indexes rally, breadth trends are stumbling
• Big rebound in earnings is already priced in

The NASDAQ Composite rallied to a new all-time high this week. The S&P 500 fell just shy of a record close of its own. While sentiment indicators suggest that investors are celebrating these new highs, a closer look shows that index-level price strength is not being confirmed by momentum. In fact just the opposite is happening, with weekly momentum trends continuing to move lower.

The Value Line Geometric Index has moved from new high to below its 10-week average in the space of a week. Momentum has peaked and is moving lower.

In every major asset class, there are typically a handful of indices to help drive our decisions from the top-down.

Whether we're looking at the US Dollar Index, the CRB, the Nasdaq, or any other variety of ETFs, these help form the basis for identifying leaders, laggards, and assessing the overall market.

The same applies to Crypto.

The only problem is, there's a painful lack of diversified indices to look at in the first place; S&P Dow Jones indices launched a Mega-Cap Crypto index in May, which only tracks Ethereum and Bitcoin, and MSCI is currently eyeing launching indexes of their own.

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

This is the video recording of the June 2021 Conference Call.

From the desk of Willie Delwiche.

Key takeaway: Last week’s volatility unwound some near-term complacency, but there is still plenty of evidence of optimism in the system. Active managers increased their equity exposure and equity ETFs continue to attract inflows at a staggering pace (though certain sectors are starting to see outflows). A more challenging breadth backdrop poses a challenge, but with economic data continuing to surprise to the upside and earnings expectations being revised higher, excessive optimism may be slow to unwind. While risks are elevated from a sentiment perspective, they are not yet being manifested in terms of price. 

Sentiment Report Chart of the Week: Large Tech Outflows

Outflows among tech stocks spiked to their highest level since early 2019. The recent spike comes after historic inflows and speculative exuberance took hold of the market. Now the market environment is portrayed by waning trading volume and...

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

Check out our latest Mystery Chart!

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?