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.
Welcome back to our latest Under the Hood report, where we'll cover all the action for the week ended July 8, 2022. This report is published bi-weekly and rotated 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.
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.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Banking on Support
Banks, broker-dealers, and capital markets have all been underperforming despite the rising rate environment. The entire financial sector has been a disappointment since last year.
When it comes to banks, the Regional Banks ETF is an excellent indicator to measure risk appetite. When times are good, these stocks are participating.
As you can see in the chart, price is currently holding above the AVWAPs from the 2018 highs and 2020 lows. This level represents a logical potential support zone.
Notice in the lower pane that momentum (as measured by the 14-period RSI) never reached oversold conditions during the current correction. Not many industry groups can say the same.
As long as this economically sensitive group remains above this confluence of support, it is a positive for the overall market.
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.
As Strazza mentioned in our Telegram live chat this morning: "Not too many charts look as good as this one right now."
It feels hard to comprehend that we're finding leadership in Chinese tech, internet, and auto stocks, but it's happening. Politicians lie. Prices don't.
And one name we've got an eye on has been coiling in an extremely bullish high flag pattern.
In our last letter, we reviewed the recent quarter and provided a structural view of the market.
In a tape as messy as this, we're focusing a good portion of our strategy on longer time frames. The market has been and continues to be a mess on shorter time frames, while equity markets still firmly reflect risk-off behavior.
With the market providing extreme readings, these are conditions by which we can anticipate a mean-reversion rally higher. At the same time, trying to catch this move in a period of continual whipsaws will be difficult.
We've been in a Bear Market since February of 2021 when stocks peaked. Since then it's been a slow deterioration ultimately hitting almost every sector, with some areas just getting absolutely destroyed.
But just to keep it simple, the bottom line is we're below overhead supply in almost every case. There are exceptions, but I think the S&P500 shows what's really going on for the average and median stock or sector.
Dividend Aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats.
In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for five to nine years.
We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money.”
Imagine if years of consistent dividend growth and high momentum and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.
The engagement between Elon Musk and Twitter $TWTR is not going to end easily or quietly.
The mercurial entrepreneur tweeted a provocative meme early this morning, depicting himself as a big-brained genius for using legal mechanisms to force accurate bot data out of the Twitter board.
