This week we’re looking at a long setup in the crowd favourite IT sector. In the week gone by, we saw some strength come through and a particularly interesting breakout too!

Let's take a look at what we have today!

We retired our "Five Bull Market Barometers" in mid-July last year 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.

I can't help but notice the similarities between the Bitcoin Crash we just saw and what happened to stocks in 1987.

You guys following me for a while know I'm not big on analogs. Every market environment is different.

But history does help us put together a roadmap. We're all humans in this endeavor after all. And that certainly doesn't change, even if we are talking about Crypto and not stocks, 2021 and not 1987.

For you guys who are new to markets I encourage you to study the past. Learn about prior cycles and what happened.

These are great lessons. I promise you.

The US Stock market was booming in the 1980s, after doing nothing for decades since topping out in the mid-1960s.

Stocks were rolling. They had meme stocks and reddit back then too. They were just called other things like Junk Bonds and Corporate Raiders.

Those were some good times.

Then came Black Monday in October of 1987.

The S&P500 fell 20.4% in a single day.

With the volatility experienced over the last 24 hours, we thought we'd provide a quick update on what's taken place, and how we're approaching the market right now.

At its peak, the total crypto market cap lost $700B in a space of less than 24 hours, equating to an aggregate 26% decline. In this same period, over 400,000 traders and $2.5B worth of funds were liquidated, making this the most violent unwind we've seen since the May crash.

It's Saturday Morning Chartoons time. 

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

You can find the whole list of trades here.

Below you'll find the full PDF of this week's charts:

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 100 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.

The Hall of Famers is simple.

We take our list of 100 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Risk assets are under pressure.

Failed breakouts and significant retracements have materialized across cyclical areas of the market, including the Russell 2000, the energy and financial sectors, and, of course, commodities.

The energy complex has endured the most severe damage in the commodities realm, with crude oil leading the pack lower. Last Friday’s session was a bruiser, with crude dropping $10 to close out the week.

This kind of volatility can be alarming for any investor.

But when we zoom out--as we like to to at the end of each month--and focus on commodities as a whole, two key takeaways come to the forefront: 

1. The underlying uptrend is still intact.
2.  A period of digestion within the ongoing trend is well deserved. 

Let’s take a look at a couple commodity indexes and try to put the recent action into perspective.

From the desk of Willie Delwiche.

While the Fed may be newly focused on inflation, the bond market does not appear to be similarly inclined. The yield on 30-year Treasury bonds this week has undercut its summer lows near 1.80% and the 10-year t-Note yield has dropped below the 1.40% level that has been important in the past. Moreover, the yield spread between 2’s and 10’s has dropped to its lowest level of the year. This drop in yields (reflecting strength in bonds) is not inconsistent with deteriorating equity market conditions seen beneath the surface (as well as increasingly at the index level). Coming about always carries risks, and the Fed is trying to change course in choppy waters.  

From the desk of Steven Strazza @Sstrazza

It's been about a month since small- and mid-caps resolved to the upside and made fresh highs.

As we all are aware, these were simply massive head-fakes. We're right back to where we started--stuck in the middle of the same range we've been in all year.

There was also plenty of evidence from our intermarket relationships and ratios to support these moves. Discretionary-versus-staples ratios broke to fresh highs. Copper versus gold. Stocks versus bonds. Inflation expectations. They all made new highs recently. But, just like most stocks on an absolute basis, many of these breakouts have since failed.

Of all these developments, it's hard to argue that any is more important than the stocks-versus-bonds ratio retracing back beneath its Q1 highs. With long rates making new lows and stocks selling off, let's talk about how we are approaching both of these asset classes right now.

Here's the S&P 500 $SPY relative to long-term Treasury bonds $TLT, zoomed out to the early 2000s.

While volatility remains elevated, I remain on the hunt for appropriate vehicles to sell premium in.

We sold premium in IWM earlier this week. Today, I'm going to drill in a little deeper into sector ETFs that are displaying the highest relative implied volatilities. This search leads me to the finance sector.

This is the video recording of our December 3, 2021, All Star Charts Crypto Weekly Strategy Session.

If the world was coming to an end, would Homebuilders be breaking out of 6-month bases to new all-time highs?

I would argue no.

The Homies are one of those groups we look to for leadership in strong markets, not in weak ones.