Key takeaway: There are signs of bears beginning to stir. Pessimism on the II and AAII surveys has reached its highest level since Q1 and put/call ratios show investors turning to the options markets for insurance rather than leverage. NASDAQ trading volume continues to unwind after surging to new highs earlier this year. This evidence of growing investor/consumer concern, especially when combined with deteriorating market internals and a disappointing macro backdrop, creates an environment ripe for a sentiment unwind. Whether a full unwind comes to fruition or not, rising pessimism tends to weigh heavy on equities after a period of extreme optimism.
If you're not long Crypto Currencies in one capacity or another, you're essentially short the space.
There is that much alpha being left on the table if you're not involved.
We can get into what's happening with all these protocols and platforms, or you can just focus on price. Fortunately, the latter happens to be our area of expertise.
The bottom line is this: If the Bitcoin vs S&P500 ratio is above 7.0, you HAVE to be long. Period.
The team had our weekly internal strategy session this morning where we go over things we're seeing in the markets. What's moving? What's not? Where is there hidden risk? What's the market missing or not pricing in?
One of the things I brought up is: "Is anyone paying attention to this breakout in Apple?" I hadn't seen or heard much chatter about it and it seems to me few are aware this is happening or thinking through the implications of what this might mean for the broader indexes.
The team did highlight the move in our recent Monthly Conference call, so it's not happening in a vacuum. But it feels that outside our walls, few are paying attention.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.
Where the USD heads next will have wide-ranging implications across asset classes by either providing a tailwind for risk assets or a headwind in the case it resolves higher from its year-to-date range.
But, as the market continues to chop sideways, we want to direct our attention to one of the most important risk gauges in the currency market.
That’s the Aussie-Yen.
In this week’s post, let’s check in on the AUD/JPY to see what information we can glean regarding risk appetite and what it could mean for other markets.
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.
We've already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottoms-up scan, "Under The Hood."
To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. There are also price and liquidity filters. Then, we simply sort by proximity to new highs in order to focus on the best players.
The goal is to catch the strongest names while they’re small and still have serious upside potential. If any of these stocks ever climbs the ranks to the big leagues, the returns could be huge. We’re looking at 5-10x 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.
These are two terms that are often used interchangeably: Technician and Chartist. But many times it’s wrong to do so. You see, all chartists are technicians by definition, but not all technicians are chartists.
What is a chart?
For me, a chart is just a visual representation of the changes in equilibrium between supply and demand.
That's all it is.
We don't have to pretend it's something that it's not.
How the chartist interprets the data on the charts is where the skill and experience comes in. The chart alone won't do much for you, in the same way that a carpenter is way better at using his tools than I could ever be.
What is Technical Analysis?
To me, Technical Analysis is the study of the behavior of the market, and therefore market participants, as opposed to the goods and the services in which a particular market deals.
We refer to the latter as "Fundamental Analysis", which we don't find helpful at all.
These are the registration details for our live monthly conference call for Premium Members of All Star Charts.
This month’s Conference Call will be held on Monday August 16th 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.
