Key Takeaway: It’s been bears on parade all year, starting with significantly less optimism coming into this year than was seen at the beginning of 2021 or 2020 and continuing through lengthy stretches of more bears than bulls on both the II and AAII surveys. Persistent pessimism among advisory services has now been broken and it’s time for the bulls to show what they’ve got left in their tank. The clock is ticking, though, as they’ve used so much of their limited firepower and yet we continue to see more stocks making new 52-week lows than 52-week highs. Bulls have put together two days of better than nine-to-one upside volume (on July 15 and again on July 19). That checks off one box (out of five) on our bull market re-birth checklist, but there is more work to be done before concluding that any uptick in optimism is well-placed.
Sentiment Report Chart of the Week: Recession Fears Misplaced?
The latest Quarterly Playbook is out, which has given us a bunch of ideas to begin exploring.
One idea stood out for me in particular because of a recent pullback offering a good entry point. It's in a bellwether dividend-paying stock that we wouldn't mind owning for the long term, but we're going to take advantage of elevated options premiums to leverage into a high-probability bet for some opportunistic income.
There's a common adage around here, a bit of advice to "draw your lines with crayons, not pens and pencils."
What it means is that when you're drawing support and resistance levels, it's best to construe them as zones rather than in terms of a single price.
It's a good rubric and a sound principle. But it makes sense to explore in greater detail why this is the case, particularly for cryptocurrency.
When it comes to this new asset class, technicals are a far more popular choice among traders and investors. It only makes sense in a market where there aren't nearly as many sophisticated fundamentals.
You're not going to discount a crypto project's cash flows to arrive at a valuation; you're going to trade the chart.
But, amid the growing popularity of technical analysis, proponents often don't recognize why price action principles work. There's far more to understand beyond drawing rectangles on charts.
Investors have a lot of questions right now. With sentiment and at some of the most pessimistic levels in history, what will it take for some of these trends to change in the second half of the year? I believe some major trends are already changing.
The Playbook takes a step back and looks at things from a more Structural perspective. If you're specifically looking for more tactical opportunities, you can check out this week's Live Mid-Month Conference Call.
Here's what we'll be discussing in our Q3 Playbook:
The US dollar and interest rates are still two of the most important charts out there. You’re probably tired of hearing it, but their future direction impacts the entire marketplace.
And, believe it or not, the currency market provides a great read on both.
Bullish data points continue to roll in left and right, supporting dollar strength. From the Korean won and Singaporean dollar to the euro and the pound, the dollar seems to break out against another currency every few days.
When we evaluate the trends in emerging market commodity currencies, it reveals insight into the recent rise in interest rates. Instead of showing strength, these currencies are catching lower -- which doesn’t jibe with a rising rate environment.
The current imbalance between job openings and unemployed persons gets plenty of attention. That there are twice as many job openings as there are people looking for a job is a historically unique situation. Having more job openings than job searchers, however, is not unprecedented. That was also the situation in 2018 and 2019, though the emergence of COVID seems to have washed that from our collective awareness. I can still clearly recall discussing skilled worker shortages with small business owners in the Midwest. The policy responses (both fiscal and monetary) to COVID exacerbated these imbalances, but the seeds of the current wage and price pressures were being sown before lockdowns and social distancing became a reality.
Yesterday, we explained how we're still approaching this recent rally with a high degree of caution.
Most names still find themselves below overhead supply, and this is a tape where whipsaws and fake-outs are likely to continue.
Beyond Ethereum and a handful of other names, this rally hasn't been widespread. Instead, most cryptos are still exhibiting generally weak action.
While this means there are still actionable ideas out there from the long side, we want to explore a higher-conviction trade over more substantial time frames that'll likely be prone to fewer whipsaws.
The Auto sector has been the flavor of the season. And by the looks of it, the season isn't over yet! We're here today to discuss another popular stock from this sector.
