There are no magic indicators that are right 100% of the time, no silver bullets, no “one Ring to rule them all.” That’s why we spend so much time talking about weighing the evidence and looking at the behavior of risk on and risk off indicators. That being said, there are times when one indicator or another seems particularly relevant. That is now the case with the number of stocks making new highs and new lows on the NYSE+NASDAQ. The spread between new highs and new lows peaked in early 2021 and was fading (though stayed positive) for much of the year. The situation deteriorated in November and new lows started to outnumber new highs. Even as the indexes moved off of their January lows, we’ve continued to see more stocks making new lows than new highs. Since 2000 all of the net gains in the major US indexes (S&P 500, NASDAQ Composite, Russell 2000, Value Line Geometric Index) have come when the cumulative net new high list has been expanding. The bottom line is that history suggests the indexes could continue to struggle so long as new lows are outnumbering new highs.
While certainly not at panic levels, we've been seeing a persistent $VIX holding north of 20, and the last two days we saw it flirt with 25. This signals to me that there is still a bit of uneasiness remaining in the stock market, leftover from the recent correction.
Scanning my books, I noticed my portfolio is a little light on delta neutral premium trades, so we're going to take the recent rise in volatility as an opportunity to add a little diversification.
As always, I take a gander at my list of the most liquid ETF options and look for the ones with the highest implied volatilities right now. And then if the chart suggests some consolidation is in order, that's where I look to strike.
As technicians, our job is to respond and react to the evidence in front of us.
The market has a funny way of punishing those who let their ego and opinions drive their decision-making instead of objectively following money flow.
We say it over and over again: As a trader, your only job is to follow money flow. Everything else is noise.
This morning, we can't help but think about the resolution from this rally seen in a handful of crypto stocks. I think Microstrategy $MSTR and Coinbase $COIN show it better than any other.
I have one trade that stands out head and shoulders above the rest as my number one F-up. I really screwed this one up.
Financially, it was my best trade of the year. Probably my best trade in several years…
But it still stands out as my worst trade of all time.
This was circa 2013. I had recently moved to Boulder, CO and life was good. New vistas, new friends, new environments, new everything.
And one thing I did which was new for me (at the time), was I had come up with a long-term bullish thesis on a stock. And over the course of a couple days, I wrote up about 5 pages of notes on my yellow legal pad outlining exactly how I’d play my bullish thesis using options.
There is plenty of chatter today about inflation, the bond market, and the Fed.
I have a couple charts to share – and a couple key points worth making.
Inflation continues to run much hotter than a year ago and the Fed is still playing catch-up. The yearly change in the median CPI was at its highest level in a decade going into COVID, and is now at its highest level in 30+ years. Pressure is not letting up, and the 3-month change in the median CPI has surged to its highest level on record.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
The middle of the curve is catching higher as the US 10-year Treasury yield pushes toward its next milestone at 2.00%.
Now that we’re starting to see some follow-through to the upside, it raises the question…
Are these new highs in the 10-year sustainable?
With inflation expectations just off their highs, short-term rates surging in the US, and yields ripping higher across the globe, we think the answer is a resounding yes!
A few weeks ago, we discussed how global yields -- particularly those in developed Europe -- were confirming the new highs for US yields.
Since then, we've only seen this trend accelerate. With central banks turning increasingly hawkish, rates continue to break out to new highs around the world.
Today, we're going to dive further into this theme by taking a look at a handful of benchmark rates outside the US.
When investing in the stock market, we always want to approach it as a market of stocks.
Regardless of the environment, there are always stocks showing leadership and trending higher.
We may have to look harder to identify them depending on current market conditions… but there are always stocks that are going up.
The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too.
We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club. We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics.
Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports.
But, now, we’re also highlighting lagging stocks on a recurring basis.
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.
