Bonds are bouncing off key levels of potential support.
For some, it’s a former low. And for others, it’s a downside extension level. Regardless, we can all rejoice that bonds have stopped falling.
That doesn’t mean we’re rushing out to buy Treasuries. Instead, it signals a constructive start to a potential bottoming process for the bond market and relief from downside volatility.
Let’s check out the charts!
First up is the long-duration Zero Coupon ETF $ZROZ:
ZROZ has rebounded above its former 2014 lows, posting a potential failed breakdown. Risks are to the upside above 82 with potential resistance at the shelf of former lows around 100.
It’s a similar story for the Treasury Bond ETF $TLT:
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
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, to 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.
Monday night we held our November Monthly Conference Call, which Premium Members can access and rewatch here.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each
The S&P 500 just experienced its longest stretch without a 1% daily swing since Thanksgiving week 2021. But moving from volatility to calm is just part of the needed rotation. It will be difficult for bulls to stay optimistic if the market is not able to rotate from weakness to strength.
After we got past sharing each others' Thanksgiving dinner menus, wine pairings, and recipe swaps, the All Star Charts gang got back to business this morning hunting for trade ideas.
We arrived at today's idea in a roundabout way:
"Discretionary stocks have been the 'least shitty' performers as of late."
"We're seeing relative strength in 'da homies. [Homebuilders]"
"In that sector, Lennar $LEN is showing the best relative strength relative to the others."
...and that is a taste of how the Thanksgiving sausage is made.
So let's dig into some visuals to highlight what we're seeing.
Following the collapse of Alameda and FTX, crypto's correlations to legacy markets have completely come off.
As an asset class, this is the most independent crypto has traded for over a year. For most asset allocators and traders, this is generally favorable because it increases the number of uncorrelated assets to profit from.
A big problem for crypto traders is they've been merely riding on a short volatility vehicle that's been tightly correlated to long-duration growth stocks.
All crypto has offered in this period is Beta rather than a unique directional market.
So it's certainly been nice to see some dislocation from equity markets -- even if crypto's been lagging hard following the FTX fiasco.
But my bet is this correlation between stocks and crypto will more than likely return in the coming weeks and prove a durable feature of the landscape.
You might not like it, but we must always deal with reality whenever money's on the table.
