From the Desk of Ian Culley @IanCulley

Did we just experience the largest bear market rally in history? 

Or did the June low mark the bottom for stocks?

Instead of getting caught up in the "bull vs. bear" debate or, even worse, attempting to pick the bottom, let’s focus on a singular fact…

US dollar headwinds persist. And whether it was the bottom or not, as long as this is the case, stocks are likely to remain under pressure.

From the Desk of Steve Strazza @Sstrazza.

Welcome back to Under the Hood, where we'll cover all the action for the week ended September 2, 2022. This report is published bi-weekly and rotated with our Minor Leaguers report.

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

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.

We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.

From the desk of Steve Strazza @Sstrazza

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.

Macro Universe:

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Structural Trends Shift in Favor of Value

We just got fresh monthly candles for August last week. When we look at a monthly line chart of the growth vs value relationship, it’s hard to see anything but a recently completed double top formation and successful retest from below. The fact that this bearish reversal pattern is occurring at a critical level of interest at the dot-com bubble highs makes this price action even more significant. As long as this distribution pattern remains valid, we’re anticipating a structural reversal in this relative trend that favors value. And as shown in the upper pane, as far as the major averages are concerned, this means we want to overweight the value-heavy Dow Industrials and underweight tech-heavy indexes such as the Nasdaq 100.

We've adjusted a position in the Paid-to-Play portfolio today:

Yesterday, we identified a number of developments in crypto and in old-school markets, suggesting it's time for buyers to step in if further damage is to be avoided.

While Bitcoin is in the process of testing support, we've seen some short-term signals of strength within the altcoins. This is a positive, but crypto assets need legacy markets to bounce here if this recent strength is to persist.

If equities can’t begin to build a bullish shape right here and now, we expect further downside. Recent US dollar strength likely needs to subside, too.

So, with our stage set, let's look at it through a more actionable lens.

What are the setups? What are we buying? What are we selling?

The most significant insider activity on today's list comes in a Form 4 filing by Juan Delgado-Moreira, vice-chairman of Hamilton Lane Incorporated $HLNE.

Delgado-Moreira reported a purchase worth roughly $1 million.

This market hasn't thrown us much in the way of productive data points in recent months.

"Messier for longer" has been and continues to be our prognosis for crypto right now. Last Monday, we concluded by arguing the following:

Following Bitcoin’s sell-off, this seems like a logical place for the crypto complex to bounce or at least chop for a few weeks, especially given stretched sentiment in the futures markets.

Because the probabilities of short-term longs are rather low given the macro backdrop, we’re not going to get overly cute and tactical trying to define a setup at this support.

The higher-probability outcome appears to be further chop.

In other words, it’s just more of the same.

There haven't been any significant developments that'd sway us to carry a more bullish tone.

Bitcoin and the vast majority of the asset class are still chopping about, while macro markets have been dragged down in the most recent risk-off move within the context of a strong dollar.

Stocks had a ripper of the June lows, and now many markets have digested those gains.

How they correct, and how they digest gains, gives us a lot of information.

To help put things in perspective, the S&P500 has retraced exactly 61.8% of the entire rally of the lows.

This is a perfectly normal correction:

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.

Remember when the stock market peaked in February 2021?

That's when the New highs list peaked. That's when the Nasdaq Advance-Decline line peaked. That's when Chinese Internet Peaked. That's when Biotech peaked. That's when all the ARKK funds peaked.

February 2021 is when everyone had a SPAC.

Remember SPACs?

This group of "Special Purpose Acquisition Companies" was a poster-child for the excess environment of Q1 2021.

These SPACs were the biggest pieces of hot garbage on the market. And everyone wanted them.

And then the market peaked and their prices came tumbling down.

Now here we are, 18-months later. And they've just decided to delist the SPAC ETF $SPAK.

A sign of the times?