We retired our "Five Bull Market Barometers" in 2020 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 and Alfonso Depablos @Alfcharts
This is one of our favorite bottom-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.
Last week’s 5.9% rally in the S&P 500 was the best single-week gain since June but it was not enough to shift any of the criteria on our Bull Market Re-Birth Checklist.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Dollar Strength Erodes
Sentiment, volatility, and momentum thrusts have all suggested an end to the US dollar wrecking ball. Now price action is confirming the data as the DXY resolves lower from a pennant formation to fresh multi-month lows. From a weight of the evidence standpoint, the dollar is done, and so are the accompanying headwinds for risk assets.
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.
We've got an oil stock on the doorstep of multi-year highs, a recent shakeout that probably rinsed out the hot-money crowd that came into the stock following their latest earnings report, and implied volatility plumbing new yearly depths.
This sets up an excellent opportunity to take a flyer on a simple long calls trade.
Our process is defined by the power of simplicity.
We don't need a complicated macro thesis to position ourselves appropriately in crypto markets. We find our edge in stepping back and identifying inflection points where we want to define our risk.
Risk should be front and center, considering recent events.
One of the takeaways from this entire FTX/Alameda mess is the necessity of risk management. Sam Bankman-Fried lost an empire in the space of a week.
If this isn't a great reminder to manage risk and position size accordingly, I don't know what it is...
A hilarious video made the rounds on Twitter showing Caroline Ellison, the 28-year-old CEO of Alameda Research, arguing against the use of stop losses.
