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All Star Charts

Expert technical analysis of financial markets by JC Parets

Internals Of Value

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From the desk of Steve Strazza @Sstrazza and Grant Hawkridge @granthawkridge

One of the most important themes these days is the rotation between growth and value stocks. Groups like energy and financials have been breaking to new highs while growth and tech indexes have come under serious pressure.

So far, 2022 has been a true tale of two markets.

While cyclicals and value stocks appear to be gearing up for a momentous year, it looks like the party is finally coming to an end for the growth trade.

We want to lean on the value-heavy leadership groups for long opportunities in 2022. As for growth, we think it’s likely to remain messy as interest rates continue to rise.  

When we look beneath the surface at growth and value stocks right now, our breadth data is confirming the action we’re seeing at the sector level.

Let’s dive in and discuss… 

[Read more…]

Headwinds Ease as the DXY Dips

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From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

What started out as a potential bullish continuation pattern in the US Dollar Index $DXY has turned into a near-term top.

After weeks of failing to hold breakouts on an individual currency basis, the tight coil in the DXY finally resolved lower.

The brief reprieve in USD strength was immediately felt across markets last week, with cyclical/value stocks and procyclical commodities catching an aggressive bid.

Now that the headwinds associated with dollar strength appear to be easing, will risk assets enjoy a tailwind in the form of sustained USD weakness?

Or was this just the latest fake-out from the DXY?

Let’s take a look at a couple of charts and highlight the levels we’re watching in the coming weeks and months.

[Read more…]

Mystery Chart (01-17-2022)

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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 of 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?

[Read more…]

The Minor Leaguers (01-17-2022)

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From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We’ve already had some great trades come out of this small-cap-focused column since we launched it in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.

We recently decided to expand our universe to include some mid-caps…

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B. And it doesn’t have to be a Russell component–it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe.

The same price and liquidity filters are applied. Then, as always, we sort by proximity to new highs in order to focus on the best players. But instead of all-time highs, we’re sorting by 52-week highs these days as we don’t want to discriminate against energy or other cyclical stocks.

The goal is still to catch the strongest names while they’re small and have serious upside potential. If any of these stocks ever climb the ranks to the big leagues, the returns could be huge. We’re looking at up to 10x moves just to break into large-cap land!

Let’s dive into this week’s report and see what’s happening in some of the hottest stocks in the Minor Leagues.

[Read more…]

Follow the Flow (01-17-2022)

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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.

[Read more…]

[PLUS] Weekly Top 10 Report

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From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we’re currently seeing in asset classes around the world.

It’s Time To Look Outside The US

The same areas of the market that are starting to drive the rotation from growth to value are also likely to drive rotation between US and ex-US stocks. The reason for this is simple. International stocks tend to have a high relative weighting toward value, while the US has one of the highest allocations to tech and growth of any country. While we’re still seeing very little evidence of a trend reversal in our ratio charts of international vs US stocks, we are starting to see more and more breakouts from international indexes and ETFs on absolute terms. Fresh legs higher from these diversified global indexes and individual country ETFs could be what sparks a turnaround in the relative trends. We want to keep a close eye on value-heavy countries such as Canada, Australia, and various areas of developed Europe. One area that is standing out recently is the Eurozone and the UK in particular. The chart below shows both the iShares MSCI UK ETF (EWU) and the European Financials ETF (EUFN) resolving higher from multi-year bases. Seeing these former laggards break out to new highs is a good representation of what we’re seeing from global equities these days, and it’s not bearish. These are two ETFs we can utilize for long exposure right now.

[Read more…]

[PLUS] Weekly Momentum Report & Takeaways

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From the desk of Steve Strazza @Sstrazza

Check out this week’s Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let’s jump right into it with some of the major takeaways from this week’s report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

[Read more…]

Commodities Turn Up the Heat

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

Commodities are making a fresh leg higher, and energy is leading the way.

Crude oil is back above our risk level around 76. And the energy-heavy CRB Index is at its highest level in more than seven years.

But it’s not just energy contracts that are working right now. We’re seeing strength across all areas of the commodity complex.

This broadening participation is evident in our equal-weight commodity index, which just hit new highs after consolidating for the past two quarters. [Read more…]

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