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.
Focus on the Leaders
From the Desk of Ian Culley @IanCulley
We’ve been loud about energy lately. And how can we not be?
Energy stocks were the most resilient during the H1 selloff and are by far the best-performing sector off the 2020 lows. Every afternoon, energy quietly leads the pack into the close, whether the market is green or red on the day.
But the recent rally in stocks has started to fizzle. And even energy is beginning to feel the downside pressure.
While everyone scrambles to label the recent rally, gearing up for the next leg higher, or preparing for the world’s end, we want to focus on the leaders – energy!
If this leadership group starts to fall, it could be an early warning sign of broad selling on the horizon.
And, with Labor Day upon us, it just so happens the energy sector ETF $XLE is retesting a critical shelf of former highs.
International Hall of Famers (09-02-2022)
From the desk of Steve Strazza @Sstrazza
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.
We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more — but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
Are Bonds a Bust, Again?
From the Desk of Ian Culley @Ianculley
Heading into Q3, we wanted to play a mean-reversion bounce in US treasury bonds. A long list of reasons supported this position:
- US Treasuries experienced their worst H1 in history (or close to it).
- Bonds were finding support at their previous-cycle lows from 2018.
- Commodities and inflation expectations peaked earlier in the spring.
- Assets that benefit from rising rates (financials) were making fresh lows.
- Global yields were pulling back.
And, quite frankly, our risk was well-defined. We can’t ask for much more. For us, the greater risk was not taking a swing at this trade in the event bonds ripped higher…
Two months later, bonds across the curve are taking out their 2018 lows. The market has proven our mean-reversion thesis wrong. But we can live that because we manage risk responsibly.
It’s the most important part of playing this game.
Easily, the second-most important is to remain flexible.
As investors and traders, we have to be able to change our opinion on any given market, especially when the data no longer supports our thesis!
We’re going to check that box today as our outlook pivots lower for bonds heading into Q4. Basically, if US treasuries are below their 2018 lows, you’ve got to be short!
When Energy Creates Wealth
From the Desk of Steve Strazza @Sstrazza
Regardless of the time frame, we continue to see leadership and relative strength from energy stocks.
Outside of utilities, it is the only sector flaunting positive returns on a year-to-date basis.
Even over the past several weeks, with the broader market coming under increasing pressure, energy stands out as the most resilient group.
When we look at the structural trend for energy stocks, this makes a lot more sense.
While most sectors and indexes are facing downward sloping or sideways 200-day moving averages, indicating that the path of least resistance is lower, energy stocks remain in a strong primary uptrend.
While the corrective action of the past few days has not left energy unscathed, the Energy Sector SPDR $XLE remains above our risk level of 79.
As long as this is the case, the bias is higher for energy, and we want to be looking for the strongest stocks to buy as a way to express our bullish thesis.
This brings us to today’s post.
2 to 100 Club (08-31-2022)
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 bottom-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.
Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey to becoming the market behemoths they are today.
When you look at the stocks in our table, you’ll notice we’re only focused on Technology and Growth industry groups such as Software, Semiconductors, Online Retail, Solar, etc.
Then, like any good technician, we filter the list down to those closest to new highs.
This allows the cream of these strong groups to rise to the top and helps streamline our mission to identify technical breakouts in the top-performing stocks.
[Options] Banking More Premium
With the rise in $VIX (the “fear gauge”) over the past several trading days continuing to persist, we’ve been on the hunt for options premium selling opportunities. Higher volatility environments lend themselves to better opportunities for premium sellers who can manage their risks and size their positions conservatively.
As such, we’re going to sell some premium in the banking sector to take advantage of elevated premiums and what appears to be a high likelihood of continuing sideways action. [Read more…]
The Unintended Benefit of Crypto
From the Desk of Louis Sykes @haumicharts
One of the hallmarks that’s defined crypto is its sheer innovative and scalable nature.
Blockchains are bringing tremendous benefits to traditional industries; self-sovereignty of massive sums of capital, incredibly efficient payment methods, digital collectibles, play-to-earn, and decentralization are all great examples.
Perhaps one of the more overlooked outcomes of this asset class blossoming is the promotion of finance among disenfranchised youth.
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