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.
Dow just 7.6% from All-Time Highs
The Death of a Wrecking Ball
From the Desk of Ian Culley @IanCulley
For weeks, evidence has pointed to a top in the US Dollar Index $DXY.
Sentiment, volatility, and momentum thrusts have each suggested an end to the US dollar wrecking ball.
Despite the mounting evidence, price hadn’t indicated any significant weakness in the structural trend – until yesterday!
Dust Your Rocks Off
From the Desk of Ian Culley @IanCulley
The bulls are dropping the US dollar like it’s hot – and risk assets worldwide love it!
Few areas are enjoying the newfound dollar weakness quite like the metals space. It’s not just precious or base metals catching higher. It’s both.
So if you shelved those shiny rocks months ago, it’s time to pull them out and take a look.
[PLUS] Weekly Observations & One Chart for the Weekend
From the Desk of Willie Delwiche.
Time for A New Driver
Priced in their own currencies, more than half of the countries in the world are trading above their 200-day averages. The US is not among them.
Why It Matters: The US has been in an uptrend versus the rest of the world for 235 weeks in a row, the longest continuous stretch of US leadership in the past 50 years. More broadly, the past decade has taught US investors that global diversification means lower returns and higher risk. But that trend is long in the tooth. If the dollar continues to fade, the opportunity for new leadership will become more apparent. Emerging Market central banks led the way into the tightening cycle and they could lead the way out of it. Remove currency factors and improving global rally participation can more readily be seen. And right now the US is not in the driver’s seat.
International Hall of Famers (11-11-2022)
From the desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts
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 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.
Value Stocks Follow Rates Higher
From the Desk of Ian Culley @Ianculley
It’s been a lonely rise for interest rates.
The stocks and commodities that tend to accompany rising yields haven’t kept pace since early spring. Rates across the curve have accelerated higher, leaving these risk assets in the dust.
But the seasons have changed – and the dust has settled.
Cyclical value sectors have found their footing in recent months. Now, they’re playing catch-up.
Creating My Own Luck
There’s a profound mental shift that happens when you flip from being in positions where bad luck could damage or ruin your trading account, to being in a position where the unexpected might actually make you a ton of money!
For options traders, an excellent example of these two positions is a short straddle vs. a long straddle.
In a short straddle, a trader is naked short an equal amount of calls and puts at the same strike and expiration. The PnL graph of a hypothetical 100-strike short straddle looks like this:
You’ll notice that as long as the underlying price (as displayed along the x-axis) stays +/- $20 from today’s price of $100, the trader will likely earn a profit as options expiration approaches.
Traders like these trades because they are high-probability bets, meaning that one has a better-than-average likelihood of earning a profit. Of course, when winning odds are favorable, the payoff usually isn’t all that high. And even worse, if the unexpected happens and a large directional move materializes, not only can you lose a lot of money, but your losses are theoretically unlimited. These losses also get increasingly worse (thanks to negative gamma) the further the market moves away from your short strikes.
I’ve been on the ass-end of moves like this before – and it’s never any fun. Ever. [Read more…]
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