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

Don’t fight trends. It never ends well.

Learning to go with the flow often comes with age and experience. Lucky for us, we have plenty of both at All Star Charts as the current cycle isn’t our first rodeo.

We’ve been pounding the table on the energy trade, gracefully accepting all of this inflation and the outrageous prices at the pump.

What can we do about it? 

We can own the strongest commodities that continue to benefit from this inflationary environment. It’s really that simple. 

Let’s take a look at one of them now.

Here’s a zoomed-out chart of live cattle futures:

Whenever in doubt, zoom out!

That's how I learned it. Mostly the hard way.

And that's something we like to do once a month, is really zoom out.

Monthly Candlesticks are great for that!

During this month's review I really noticed how much stronger some of the European Indexes were. Especially this one here:

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

The Japanese yen continues to be front and center, as the safe-haven currency can't seem to find its footing.

In a market where risk assets are struggling to catch any sort of sustained bid, finding investment opportunities in yen has been a great strategy. It continues to work.

Long USD/JPY has been one of the best trades on the sheets this year – by far! And it looks to be continuing its upward trajectory, as it hit fresh 20-year highs earlier this week.

Aside from providing a stellar trading opportunity, the current intermarket relationship between this forex cross and the bond market may reveal the near-term direction of the US 10-year yield.

Let’s take a look.

Here’s an overlay chart of the USD/JPY pair and the US 10-year yield with a 26-day correlation study in the lower pane:

When the worst stocks in the world can't go down, what does that say about current market conditions?

Granted, I'm more into breakouts above horizontal trendlines than diagonal ones, but as Steve Strazza told me yesterday, "of course, but one comes before the other".

When you're right you're right Mr. Strazza.

Here's that breakout we were discussing:

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.

It's been a minute since we've put some delta-neutral credit spreads on. And while VIX is off its highest levels of the year, there is still plenty of elevated premium in pockets.

The team here at All Star Charts has been monitoring the elevated options premiums in the Consumer Discretionary space. The $XLY ETF has been persistently hanging around the top of our implied volatility lists for the last couple of months. We talked about it yesterday during the @allstarcharts live twitter spaces chat.

And I like having a few delta-neutral trades on to provide some portfolio balance against my bullish and bearish directional bets in individual stock names. So $XLY is providing us a good opportunity to collect some income.

I lived on 55th Street on the East side of Manhattan for a while.

To get some exercise I would often run along the East River and many times I'd run across the 59th Street Bridge over to Queens Blvd, and back.

It wasn't a long run, but it got me going and would get me away from my screens for a bit.

Exercise was part of my "support" system during some of those rougher years.

On the way out to Queens you go over Roosevelt Island (which is a really weird place btw). And then you have Queensbridge over to your left directly north of the 59th St. Bridge.

For those unfamiliar, Queensbridge is the largest housing project in North America.

It's where Nas is from, arguably the greatest rapper of all time. I personally don't make that argument, but I can see how you could (he's in my top 5).

There's a famous diss track that Nas titled "Ether".

To this day that word is synonymous with ruthlessness and dominating opponents.

Many many years later, here we are....

Looking at a chart of Ether.

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

The Japanese yen continues to slide.

In early April, we highlighted the multi-year base in the USD/JPY cross. We were anticipating a significant breakout based on the broad weakness in the yen.

Even gold, one of the worst performing assets, looked strong denominated in yen.

We went so far as to title the post Anything in Yen.

Funny or not, it was true.

Not long after the post, we got the breakout we expected. And, two months later, the USD/JPY is kicking off its next leg higher, printing fresh 20-year highs.

Let's take it a step further and outline some trade setups in other currencies denominated in yen.

Remember, everything and anything seems to work priced in yen these days.

First, a quick revisit of the USD/JPY chart we shared in April. Here’s the updated version:

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

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

For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.

That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.

We expanded our universe to include some mid-caps.

To make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.

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.

With everyone so certain about the upcoming recession, even Cardi B, why don't we take a step back and look at what the actual prices of stocks are doing.

You can see here that the Dow Jones Industrials and Dow Jones Transports have done absolutely nothing for over a year.

For perspective, stocks first peaked in January of 2018, then went nowhere for 3 years, and finally broke out:

From the desk of Steve Strazza @Sstrazza

We held our June Monthly Strategy Session last Thursday night. Premium Members can click here to access the recording and the chartbook.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends.

This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.