From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
Not all stressors are debilitating.
In some cases, stress can push us to perform at our highest level. But, of course, there are instances when opposing forces become overwhelming, making it near impossible to reach our goals.
We’ve all been there.
And the markets are no different.
While we keep tabs on our heart rate or blood pressure to gauge our stress levels, we focus on credit spreads to measure stress in the market.
Given that rates continue to rise worldwide, it’s an appropriate time to evaluate these spreads and the potential obstacles that may lay ahead for risk assets.
We recently broke down credit spreads in anticipation of them widening and outlined some charts that are driving this trend.
Read our January 27 post for more information about the ins and outs of credit spreads and how we analyze them.
Since these spreads provide valuable information on the health of the overall market, we’re going to check back in and discuss another chart that is on our radar.
These are the registration details for our live mid-month conference call for Premium Members of All Star Charts.
Our next Live Call will be held on Tuesday February 22nd at 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
Consolidation and range-bound action have dominated the currency market since late last year.
While commodities and cyclical stocks -- especially energy -- continue to catch a bid, commodity-centric currencies like the Australian and Canadian dollars fail to show any definitive signs of strength.
At the same time, the US dollar isn’t doing much either, as the US Dollar Index $DXY has been chopping sideways for several months.
Long story short, indecision is the overarching theme for forex markets at the moment.
One forex pair that does an excellent job of illustrating the trendless nature of these markets is the AUD/JPY.
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.
Remember back in the day when crypto was its own thing?
It didn't matter what the Dow, copper, or bonds were up to because Bitcoin and crypto did whatever they wanted.
That ain't the case anymore.
Today's market is entirely different, with far more sophisticated drivers than just a few years ago.
Crypto and risk assets have become heavily correlated. And, in some respects, Bitcoin's really just been somewhat of a beta chase ever since the onset of the pandemic.
Last month, the 30-day correlation between the Nasdaq 100 and Bitcoin was an incredibly positive 0.90. They've traded in lockstep with each other.
So it's fair to say that if you're a crypto trader, it's paid to watch the macro environment.
In Major League Baseball, the 40/40 Club is an exclusive group of players who are the only ones to have achieved both 40 home runs and 40 stolen bases in the same season.
The first player to achieve this milestone was Jose Canseco in 1988 as a member of the Oakland A’s – back during the “Bash Brothers” days with his steroids pal Mark McGwire.
Since then, only three other players have joined this list: Barry Bonds (1996), Alex Rodriguez (1998), and Alfonso Soriano (2006).
Here at All Star Charts, we’ve achieved a little bit of our own 40/40 dynamic as JC celebrated his birthday this week and joined me in the 40+ crowd of awesomeness. Perhaps it’s not quite as exciting as crushing home runs over the wall or swiping second base against catcher Yadi Molina. But I like to think it’s cool in its own way.
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.
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.
We recently decided to expand our universe to include some mid-caps…
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.
The way we did this is simple…
To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B.
On this episode of Pardon The Price Action, we're talking about which stocks have been, and are, benefiting the most from higher interest rates.
Insurance stocks are ripping, International equities are outperforming and it's not just Energy commodities that are doing well. We're also seeing the strength in Base Metals and Agriculture.
With many Growth stocks still under pressure, which are some of the best areas to sell short?
All this and more on this week's episode of Pardon The Price Action.
