From the desk of Steven Strazza @Sstrazza

Check out our latest Mystery Chart!

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 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?

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

The market has been a choppy mess for months. 

Unless you’ve been stuck under a rock or at the beach all summer, this is old news. And we’ve admittedly been a bit obnoxious when it comes to rehashing this theme. But usually when we find ourselves harping on something, it's because it's a big deal.

Our own behavior can be fantastic information, and it's become a part of our process to pay special attention whenever we begin to repeat ourselves a lot.

This week is no different, as the US Dollar Index $DXY provides another example of the market’s sloppy state of affairs.

Just when we thought we might finally have some decisive price action in the Dollar, Friday’s attempted breakout followed by Monday’s weakness is casting some serious doubts.

Was last week’s breakout above the March pivot highs valid?

Or was it just another failed move to add to the market’s growing list of whipsaws and fake-outs?

From the desk of Steve Strazza @sstrazza

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 weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.

In our last report, we pounded the table on our position that markets are a total mess these days. Another theme we hit on was how many significant risk assets were trading at or below critical levels of overhead supply.

From the desk of Willie Delwiche.

As we've still yet to see a decisive shift to a risk-on environment, caution remains the general guiding principle for this market. At the same time, there are opportunities in crypto that we'd like to take advantage of. 

In the Cyclical portfolio, we’re shifting domestic equity exposure from small-caps (IJR) to mid-caps (IJH). Small-caps have been stuck below a now-falling 50-day average for nearly two months, and our industry group rankings show small-cap groups losing relative strength versus both large-caps and mid-caps.

Two things to note in the Tactical Opportunity portfolio update - a change that is being made and one that is not being made. First, we’re putting some cash to work by adding a 5% position to Ethereum (ETHE). Breakouts are being seen across the crypto space, and we want to follow that strength. Second, we’re keeping our exposure to commodities (DBC) for now. We’re giving it the benefit of the doubt, as the longer-term up-trend remains intact.

From the desk of Willie Delwiche.

Key Takeaways:

• Emerging Market indexes weighed down by weakness at top.
• Europe & Middle East showing leadership.
• If China is finding a bottom, broad EM strength could support a sustained rally.

Here in the US, a handful of mega-cap stocks are pushing the indexes to new highs, while beneath the surface many stocks are languishing. The NASDAQ Composite began this week by making a new all-time high, but it was the first time in eight days that there were actually more stocks making new highs than were making new lows. The S&P 500 is trading in record territory, while nearly 40% of its stocks aren’t even above their 50-day averages. 

Anything gold-related has not had any fun 2021. I can only imagine the disdain gold bugs must be feeling as they watch governments print money around the world, all things crypto soaring, and all the while their precious shiny little rocks doing jack squat.

If you've been long gold, I'm sorry.

But there's good news...

JC and I were chatting yesterday about what appears to be an opportunity in the Gold space.

Maybe, just maybe, gold has found a short-term bottom? We're not going to go out on a limb and declare THE bottom, but recent price action suggests to us that a bounce might be in store. As such, we want to get involved for a quick little hit-and-run play.

As we laid out in yesterday's call, if Bitcoin is in the 50,000's, we need to be aggressively long crypto.

There's just no way around it.

Above 47,000, the bias is clearly higher toward the first half highs:

The projected move into the 60,000's roughly represents a 30% move. If we know anything about the altcoins, it's that many of them are a double, if not a triple in that environment...

We're already seeing that leadership emerge under the surface, with the altcoins reasserting their former leadership at their pre-covid highs on a relative basis:

Commodities are just as messy as any other market at this point, with a lot of constituents now flirting with their overhead resistances.

In such a market scenario, there is one name that's peeping out above its resistance. And that's the name we're going to discuss today.

One great thing about Technical Analysis is that we don't have to pretend to be experts on every subject. Heck, I'm completely clueless on most things.

I know a lot about Baseball, a decent amount about Wine, and I can tell you the direction a chart is currently heading in. Outside of that, I'm mediocre at best on most topics.

So when we laid out the Cardano trade earlier this month, it was purely based on price. The idea was to go long $ADAUSD if it was above 1.40, which represented around $35-$40B in market cap at the time.

• We saw plenty of volatility in the weekly rankings last week (e.g., Health Care rising from #6 to #2, Financials dropping from #1 to #5) but some underlying trends remain intact: Cyclicals (especially outside of Financials) are lagging and the Communication Services sector may not be quite as strong as its current ranking suggests (on an equal-weight basis, it’s ahead of only Energy).
• The Industry Group heat map shows nine of the top ten groups are either large-cap or mid-cap groups (mostly large-cap). Nine of the bottom ten groups are either small-cap or mid-cap (mostly small-cap). More on this later.

From the desk of Steve Strazza @sstrazza

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. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: because they think the stock is about to move in their direction and make them a pretty penny.

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest "Under The Hood" column, where we'll cover all the action for the week ended August 20, 2021. This report is published bi-weekly and rotated on-and-off with our "Minor Leaguers" column.

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.