This is the video recording of the December 22nd Weekly Town Hall w/ Willie Delwiche
12/22/21 2:00 PM ET [Read more…]
Expert technical analysis of financial markets by JC Parets
by Peter
This is the video recording of the December 22nd Weekly Town Hall w/ Willie Delwiche
12/22/21 2:00 PM ET [Read more…]
by Peter
From the desk of Willie Delwiche.
Key Takeaway: The sentiment backdrop is more characterized by a lack of optimism than widespread pessimism. This is in sharp contrast to the experiences of December 2020 and 2019. In those instances, too much holiday cheer led to hangovers in the year that followed (don’t forget, new highs peaked early in 2021 and many areas have been a sideways mess for months now). The current sentiment backdrop is not dissimilar to (though less extreme than) what was experienced in December 2018. Intense selling that month had investors thinking more about the Grinch than Santa Claus. While probably won’t get widespread pessimism this time around without further volatility – but if we do and investors throw in the towel on stocks, it could ultimately help light a fire that leads to early year breadth thrusts like what we experienced in early 2019.
Sentiment Report Chart of the Week: Households Are Loaded Up On Equities
Quarterly data from the Federal Reserve shows that asset allocation at the household level shows a historically high tilt toward equities and away from bonds. There are certainly quarter-to-quarter variations, but the inverse relationship between the stock/bond ratio and forward returns for the S&P 500 is, over time, about as tight as they come. Households loading up on stocks (in terms of flows and overall levels) tends to be a headwind for returns.
What a difference a few days makes, eh?
On Monday morning, if you were on twitter or watching the teevee you’d have assumed the stock market was about to get cut in half and the pitchforks were going to be lining up outside the Federal Reserve building in Washington, D.C.
Then, the market did what the market does and now here we are with the S&P 500 looking like it wants to make another run at all-time highs.
Forget about market volatility — how about trader’s emotional volatility?!
With this in mind, there is still some nice options premium being priced into individual names that offer us some unique tactical opportunities for some quick gains. [Read more…]
by Peter
Join Sean and JC on Tuesday December 28th at 4:30 PM EST for our Options Holiday Party Livestream!
Don’t miss this quick video below where Sean previews the event.
by Ian Culley
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Major world currencies continue to struggle against the US dollar.
Both the euro and British pound have been coiling near 52-week lows against the dollar. We’re also seeing weakness spread among commodity-centric currencies, as the Canadian dollar hit new 52-week lows this week, and the Australian dollar accomplished the same earlier in the month. As for the safe-haven Japanese yen, USD/JPY hit its highest level since 2017 at the end of November.
The bottom line is that we continue to see broad strength from the greenback.
Meanwhile, the US Dollar Index $DXY continues to consolidate within a tight continuation pattern.
As we wait for a resolution either higher or lower, we can look to these individual forex pairs for an indication of which direction we’re likely headed.
Let’s revisit the potential failed breakdown from the Australian dollar earlier in the month and the recent action in the Canadian dollar for clues.
by Peter
From the desk of Willie Delwiche.
Key Takeaways:
There was a story in the WSJ earlier this year about a fund manager who held 900 of his best ideas in his main mutual fund. I saw a model this summer that was made up of nearly 100 individual momentum indicators. Some will use a double-digit number of categories for gauging the market. One more holding, one more indicator, one more lever – it’s as easy as adding one more column in the spreadsheet. If more is better that is great, the question though is at what point is more just too much.
Information, even when useful, can easily pile up and become overwhelming. This adds to, rather than reduces noise. Distillation is an ongoing challenge in this age of distraction. There is a tension between focusing on as much as we need to, but as little as we have to. This can matter to investors facing the prospect of wading through 2022 outlook pieces filled with forecasts, expectations and a myriad of moving parts. I’d rather focus on just a few (less than a handful) of indicators for identifying risk and opportunity next year. I expect they will matter in 2022 because they have mattered most of the time in recent years.
by JC
It’s not a secret around here that market breadth started to deteriorate in February.
If you recall, that’s when everyone had a SPAC.
The IPO index peaked, ARK Funds, Biotech, the new highs list, etc all stopped going up.
But more recently, market breadth is getting all the attention. Everyone is a breadth expert now, you notice?
I’m even getting software developers asking me about my breadth analysis wishlist so they can build it for me. Which I love and I certainly appreciate, but just goes to show you another sign of the times.
The way I see it, if you’re trying to get defensive NOW because of breadth deterioration, I think you might be looking at it completely wrong. [Read more…]
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.
Then we flip through our list of stocks flashing unusual activity and pick the best setups using many of the same technical filters we do for our other scans. And just like that, we’ll follow the money flow and fatten our own pockets along with some of the world’s most powerful financial institutions.