What are the things we look for most when trying to identify leadership?

First, it’s all relative. When the market is selling indiscriminately, this becomes more challenging. You’re literally looking for the assets that get hit the least. It's not until the volatility subsides that we start looking for those that rebound out of it the strongest.

In today’s post, we’ll use the recent selloff and rebound in crypto as a case study for how we pick winners out of a loser's market.

Here are two of our favorite ways to find future outperformers:

• Relative resilience during selling pressure.
• Relative momentum and strength - both into the peak and off the lows.

With the former, we can use tools like relative strength - or, rather, the absence of weakness - in addition to chart characteristics like bullish divergences and momentum not hitting oversold.

With the latter, we’re again looking at relative strength. Who were the biggest gainers since the market bottomed? Who are the first to take out their AVWAP from the highs and/or other key levels?

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we’ve been working on internally is using various bottoms-up tools and scans to complement our top-down approach. It's really been working for us!

One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small-, to mid-, to large-, and, ultimately to mega-cap status (over $200B).

Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.

But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

From the desk of Willie Delwiche.

At this point, the data has spoken.

If you're not long Crypto Currencies in one capacity or another, you're essentially short the space.

There is that much alpha being left on the table if you're not involved.

We can get into what's happening with all these protocols and platforms, or you can just focus on price. Fortunately, the latter happens to be our area of expertise.

The bottom line is this: If the Bitcoin vs S&P500 ratio is above 7.0, you HAVE to be long. Period.

The team had our weekly internal strategy session this morning where we go over things we're seeing in the markets. What's moving? What's not? Where is there hidden risk? What's the market missing or not pricing in?

One of the things I brought up is: "Is anyone paying attention to this breakout in Apple?" I hadn't seen or heard much chatter about it and it seems to me few are aware this is happening or thinking through the implications of what this might mean for the broader indexes.

The team did highlight the move in our recent Monthly Conference call, so it's not happening in a vacuum. But it feels that outside our walls, few are paying attention.

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

Last night we held our August Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the desk of Willie Delwiche.

Key Takeaways:

• Inflation narratives, not inflation itself, proving to be transitory 
• Economic rebound and higher inflation sapping financial liquidity
• Stocks (and bonds) usually struggle when inflation surges

With inflation, first it shocks you then it sneaks up on you. That is the way it has played out in 2021. This Spring, when the yearly inflation numbers started to heat up, newspapers ran banner headlines announcing the news and inflation-related Google searches exploded. In the months since, inflation has moved out of the headlines and searches related to it have fallen. What has shown little sign of letting up is inflation itself. 

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

The US Dollar Index $DXY has been our main focus as it nears the upper boundary of its recent range.

Where the USD heads next will have wide-ranging implications across asset classes by either providing a tailwind for risk assets or a headwind in the case it resolves higher from its year-to-date range.

But, as the market continues to chop sideways, we want to direct our attention to one of the most important risk gauges in the currency market.

That’s the Aussie-Yen.

In this week’s post, let’s check in on the AUD/JPY to see what information we can glean regarding risk appetite and what it could mean for other markets.

Let’s dive in.

First, we have a daily chart of the AUD/JPY:

If there's one prevailing theme right now, it's that there's a growing list of cryptos making new highs.

It all started with Cardano, and we know how that turned out...

For us, it's very simple. The coins that are among the first to breakout are the strongest names and will continue to lead the asset class higher.

As we said in yesterday's note, if you're solely focused on Bitcoin wedged under resistance, you're not seeing the strength under the surface:

Just take a look at the Altcoins reasserting leadership versus Bitcoin at this very logical level.

Some stocks are going up in value.

Most stocks are not.

If there's been one theme that we keep seeing for most of the year, it's that.

Sure, some stocks are doing well. Most stocks aren't, as we discussed here.

You can really see it in the Nasdaq Advance-Decline line, as it sits at new 8-month lows:

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.