Earlier this morning, the long-awaited Ethereum merge was finalized.
Ethereum has successfully transitioned into the proof-of-stake (PoS) model, leaving Bitcoin as the only proof-of-work (PoW) blockchain of scale.
This is a major turning point, particularly in an ideological sense. The debate between the PoS and PoW frameworks will only intensify following this transition.
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that guides us towards the very best stocks in the market. We have incorporated our stock universe of Nifty 500 as the base this time around. Among the 500 stocks that we follow, this scan will pump out names that are most likely to outperform the market.
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.
Key Takeaway: The bulls have some heavy lifting as bears pack on the pounds. Yes, last week was impressive, as was the summer rally. But questions about sustainability remain. After all, in the wake of the greatest bull market rally in history in 2020/2021, it shouldn’t be surprising to get the most significant bear market rally ever in 2022. That leaves stocks with an uphill battle in the face of persistent macro headwinds (rising interest rates, dwindling growth expectations, and unrelenting US dollar strength). While pessimism has reached levels indicating opportunity and decreased risk for longs, downside risks remain. An increase in selling pressure could excite the bear camp, prompting a more complete unwind in equity exposure and accelerating interest in bonds even if yields continue to move higher.
Sentiment Report Chart of the Week: Bonds Unloved For Long Enough?
Risk markets tanked yesterday after the release of CPI data for August, as inflation numbers ran hot against expectations.
Crypto markets especially felt the heat, with Bitcoin dropping 10% on the day and Ethereum posting an 8.5% drop.
With the CPI print behind us, yet another volatile event is on the horizon. That's the Ethereum merge, which is on track to happen in the next 24 hours.
In the past, we've mentioned that the merge is merely a narrative, as Ethereum is just tracking with the equity markets.
While this still holds true, it would be natural to expect a brief decoupling between Ethereum and equities, given the skewed positioning within the futures markets.
One simple concept has served me well over the years: Don’t fight the primary trend.
There are many other best practices I use to maintain my sanity regardless of underlying market conditions. But sticking with the underlying trend is fundamental to any trader’s success.
As Charles Dow established more than a hundred years ago, trends persist! This concept is one of the key Dow Theory tenets and forms the foundation of any trend-following strategy.
It’s our job as technicians, traders, and investors to identify the primary trend and ride it as long as possible.
And it’s difficult to imagine a stronger trend in 2022 than the rising dollar.
Labor market imbalances are fueling a persistent rise in inflation
Median CPI hitting new highs means inflation has not peaked
Equities will need to reckon with more Fed tightening and higher bond yields
Surging inflation over the past year has always been about more than just planes, trains, and automobiles - how much they cost to purchase and how much they cost to operate. Too much of the focus has been on the inflation outliers like the spike & cooling in used car prices or the surge and collapse in gasoline prices. Those are post-COVID talking points, but not really drivers of the underlying trend in inflation. So while headline CPI and (to a lesser extent) core CPI get the headlines, median CPI continues to trend higher, as it was doing pre-COVID and as it has been doing in recent months.
