Cotton and coffee continue to rip. Crude oil and the energy space are grinding higher. Live cattle are breaking out. Even precious metals are starting to catch a bid.
Fast forward to today, and Ags have emerged as the clear leaders over the near term. They’ve been ripping higher while the majority of the commodity space retests critical levels of former resistance and continues to consolidate.
The fact that grains, softs, and livestock are marching higher while their peers are under pressure, tells us this is an area we should focus on for long opportunities. It’s where the relative strength is right now.
You can see what things looked like coming into Thanksgiving in this week's RPP Report.
But with the prices of many key assets now below critical levels, we wonder if this is just more of a messy market, or the beginning of something bigger.
Here is the S&P500 stuck below this overhead supply from earlier this month, but above former resistance from September.
You know how parents always tell you nothing good ever happens after midnight? Well in the S&P500, nothing good happens below 4500:
If we're below that then there is a probably a much bigger problem out there, and the heaviest cash positions in 18 months would be warranted.
What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So, let us know what it is… Buy, Sell, or Do Nothing?
Given the recent volatility over the last few hours, we wanted to quickly send this update ahead of the recording of our weekly conference call to detail what's taken place and to discuss our approach to lower time frames right now.
The most likely selling event would be driven by derivative volatility through a cascading of long liquidation forced selling pressure. There is certainly a possibility this could take place, with funding still pointing to bullish positioning from speculators, but it looks unlikely with the strength of spot flows supporting the market right now.
This is primarily where we've seen the selling pressure take place, with over $750M of liquidations experienced over the last 24 hours. As much as on-chain spot-buying drives long-term cycles, the derivative markets ultimately get the final say for lower time frames.
In this podcast episode I sit down with one of my favorite technicians of all-time - John Roque. This is one of those people who influenced my thinking very early on. The combination of his simplicity along with sports analogies to describe market behavior made me a huge fan of his right away. This was about 15 years ago.
Since then, you'll here me throw out John Roqueisms all the time. I learned a lot from his way of thinking.
In this conversation we talk about the stock market, Gold, Bitcoin and Tech stocks. John also shares some fun stories about those who inspired him throughout his career and some of the things he’s learned more recently.
Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
We consider this our state of the union address, as we break down and reiterate both our tactical and structural outlook on various asset classes. Our ultimate goal is to discuss the most important themes and developments that are currently playing out in markets around the world.
There's been plenty of action these past few weeks. Let's kick things off with stocks and try to make sense of what we're seeing.
For the Indian market participants, the currency section has been extremely range-bound. And it's been that way for a while now! Every time we talk about it, there's nothing new to say.
Over the last two weeks, we've seen Bitcoin fall from 69,000 to an intraday low of 55,000, acting as a serious headwind for most of the asset class.
Despite this, spot flows have remained strong throughout this volatility, and there's a growing divergence between investor buying and price action.
Selling pressure appears close to being exhausted, and given the developments we'll outline in this update, the conditions are looking increasingly ripe for upside in the coming weeks.
We have 2 new Options trades this week as our Thanksgiving Pairing. A Bull Call Spread in Unity Software $U and Bullish Risk Reversal in Cheniere Energy $LNG.
Here are the plays:
We're buying a $U February 200/250 Bull Call Spread for around a $10.00 debit.
And an $LNG June 90/130 Bullish Risk Reversal for an approximately 25 cents net credit.
Check out our short video with the thought process behind these trades:
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
You already know how we feel about the US Bond Market.
We like the short side when it comes to treasuries.
Lately, we’ve been keeping a close eye on the long end of the curve since it hasn’t kept pace with shorter-term yields. Though this is still the case, the 30-year yield has found support in recent weeks as rates continue to rise across the curve.
This should keep the bulls happy for now as an environment where long rates are making new lows is not supportive of higher prices for risk assets.
But that’s not what’s happening. We remain in a rising-rate environment and don’t see signs of that changing anytime soon. As long as this remains the case, we want to be selling bonds and betting on higher prices for risk assets.
