JC had a great blog post out this week about zooming out. In a nutshell, he was reminding us that zooming out and looking at price action from a wider lens often makes the present murky waters look suddenly clear. It's easy to get distracted by the day-to-day price action and to look at only the last few months of daily charts and conclude that a stock or an index is in one sloppy clusterjam of price action.
But when you look at that same price action, instead with weekly or monthly candles, the more recent ones will often look like insignificant noise in an otherwise smoothly trending longer term pattern.
In the post referenced above, JC shared several current examples of instruments that look sloppy recently, but the bigger picture is still sitting pretty.
One of the stocks he mentioned is currently giving us a nice pullback to get a nice entry on.
One of the hallmarks of the beginning stages of new trends, irrespective of asset class, is the thrust.
Thrust: push suddenly or violently in a specified direction.
There are many different ways markets can thrust, but it's commonly one of two:
momentum; or
breadth.
In Monday's letter, we discussed that if Bitcoin could close in the green, it'd be the first time it's seen seven consecutive positive closes since the July short squeeze.
Fast-forward, we're now sitting on eight with a probability of nine green candles in a row:
Over the past half-decade or so, we've seen the US Dollar Index maintain a very high negative correlation with risk assets.
When stocks are doing well, the Dollar has normally been under pressure. And when stocks have struggled, as most of them have over the past year, the US Dollar has kept a bid.
Look how poorly the Dollar did when stocks ripped in 2020 off those pandemic lows. And then look at the strength in the Dollar over the last year as most stocks have struggled:
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Rates continue to move higher around the world as central banks do their best to combat inflation.
As investors, our best course of action is to position ourselves in those areas that benefit most from rising rates.
Commodities and cyclical stocks immediately come to mind. But there are also specific currencies that tend to excel in rising rate environments.
Today, we'll discuss a handful of emerging-market currencies with heavy commodity exposure.
We’ve been waiting on these currencies to catch higher and confirm the price action in commodities since last year… and it looks like it’s finally happening.
Let’s dive in.
First up is an overlay chart of the US 10-year yield and our equal-weight basket of EM commodity currencies:
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 $1B 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.
The way we did this is simple…
To make the cut for our revised Minor Leaguers list, a company must have a market cap between $1B and $4B.
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.
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.
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Tuesday April 5th @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Cyclical stocks are all the craze.
If you're doing well this year, it's because you own these stocks. If you're not, it's because you don't own these stocks.
Whether we're talking about energy, agricultural inputs, or industrial metals, these are the kinds of industry groups that are showing relative strength.
And, to be clear, this is nothing new. This theme has been in place for over a year now.
The only new development is that we're seeing upside momentum in these names pick up. As a result, the gap between these winners and the rest of the market has widened to historic levels.
