Welcome back to Under the Hood, where we're covering all the action for the week ended September 30, 2022. This report is published bi-weekly and rotated with The Minor Leaguers.
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.
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.
You need to squint to see it, but the long-term trend in the CRB Commodity index fell last week for the first time since the end of 2020.
The Details: This uptrend, the most persistent since 2002-2006, lasted 94 weeks. During that period, the CRB index was up nearly 70%. Over the past two decades, the CRB index has been trending higher 60% of the time and has risen at a 7.3% annual rate during those periods. It has fallen at 5.5% annual rate during the remaining 40% of the time (when the long-term trend has been falling).
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Dow Leads Down
Not only is the Dow trading at its lowest level since November of 2020, but momentum is confirming the move with its lowest reading since the COVID-crash back in Q1 of 2020.
The summer lows we’re watching coincide almost perfectly with the pre-COVID highs around 29,600. This confluence of interest reinforces the importance of the current level. As long as the indexes are below their summer lows, sellers are in control.
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.
Put September and Q3 in the books. It was one to remember.
But we're turning the pages to October today and the rally in the markets is helping to reveal where the new strength may emerge for the next bull run, as well as some significant levels of support for beaten-down stocks and sectors.
Today's trade is fading the recent volatility against a key nearly year-long level of support in a sector that got badly beaten last month.
Equity markets have been selling off hard, while Bitcoin and crypto have been flat.
The primary driver of Bitcoin and crypto price action, more generally, has been the tight trading correlation to legacy markets. In fact, the two have been trading tick-for-tick over the last year now.
So Bitcoin's volatility in the face of the recent risk-off action in equity markets has our attention.
But is this a new trend? Is Bitcoin finally going to decouple here, or is this just a temporary bout spurred on by unique conditions?
The gloom and doom on twitter over the weekend was pretty epic wasn't it?
And it's probably well-deserved.
The S&P500 just went out at new 22-month lows.
Gold investors were convinced by con artists that it was an inflation hedge, when it turned out to be the exact opposite all along - closing the month at new 2-year lows.
And of course, the greatest Ponzi ever - US Treasury Bond Market going out at the lowest levels since 2013:
