From the Desk of Ian Culley @IanCulley

Each commodity market has unique supply and demand dynamics.

The result is a diverse set of assets offering a steady flow of trading opportunities.

Today, I’ll outline two promising trade setups – one long, one short.

Let’s start with a fan favorite…

Natty Gas!

Natural gas futures gained over 6% on Thursday, taking out a key pivot high.

Here’s the continuation chart posting its highest level since March:

Notice natty gas is finding support above a former resistance zone at roughly 2.835. 

On Wednesday’s "What the FICC?" I mentioned trading against Tuesday’s low based on this near-term support.

Price has ripped higher since, taking out a shelf of pivot highs and filling a downside gap from early September.

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 150 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that. Click here to check it out.

The Hall of Famers is simple.

We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

*Click table to enlarge view

From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts

We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.

However, when it comes to our latest project, it couldn't be any simpler!

With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.

Welcome to The Junior Hall of Famers.

This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.

There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if price is rising. That's good enough for us.

One of the better indicators of a healthy bull market is when you see Consumer Discretionary stocks (the things we want) outperforming Consumer Staples stocks (the things we need).

The ratio between Discretionary and Staples is one we look at during bull markets, to confirm what the indexes are doing, as well as in bear markets to find divergences that may turn before the indexes themselves (see '08-'09).

This really has been one of the more reliable indicators for many years.

And wouldn't you know it, as pessimism spikes, volatility pops, and the permabears begin to pound their chest again, Discretionaries are putting in higher lows relative to Staples.

This is classic sector rotation we see during healthy market environments:

From the Desk of Ian Culley @IanCulley

Borrowing costs are increasing, and US Treasuries are tanking – again. 

Everyone knows it. Even my therapist commented on interest rates and the “terrible” economy.

The 30-year T-bond has hit our initial target. And the 10-year is within striking distance. 

So much for limited downside risk for the bond market. Perhaps the call for a 5.25 print on the 10-year yield by Christmas wasn’t aggressive at all.

But elevated yields aren’t the problem…

And I don’t care about the economy when it comes to market speculation.

Remember, we don’t trade the economy. We trade the markets or – more precisely – price.

Interest rates hung around decade highs earlier this year while the Nasdaq 100 enjoyed its best first half since its inception.

This has to be one of the world's most important trends right now. How could it not be?

You hear all this nonsense about the S&P493 and how it's only 7 stocks going up.

But those are just lies. That's not how the market works, and that is certainly not what's been happening this year.

The real trend here is in the outperformance of the largest companies, particularly mega-cap growth, relative to other indexes with more diversified sector exposure and market-caps.

This is the Nasdaq100 making new all-time highs relative to the much broader Russell3000 Index:

From the Desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as "a market of stocks."

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions. But there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club.

We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports.

Now, we're also highlighting lagging stocks on a recurring basis.

Welcome to the Short Report.

From the Desk of Ian Culley @IanCulley

The most important chart in the world is back in action!

A rising US dollar is generating increased selling pressure for risk assets and global currencies.

US Treasury bonds, stock indexes, and even commodities are catching lower.

Yet it’s nothing new for the top components of the US Dollar Index $DXY (the euro leads at 57.6%, followed by the yen at 13.6% and the pound at 11.9%).

New lows and broken support have become standard for these currencies. 

But King Dollar’s command is spreading to the more resilient pockets of the forex market, as fresh breakouts mount.

Here’s the US dollar-Canadian dollar pair breaking above a key retracement level to six-month highs following a litany of missed attempts:

From the Desk of Alfonso Depablos @Alfcharts

Rising rates have been a worldwide phenomenon for the last two and a half years as yields have climbed non-stop.

Not only are we seeing the curve in the US reach decade-long highs, but the benchmark yields in Germany, France, Spain, and even Japan are also trading at multi-year highs.

Below is the US 10-year Yield reaching its highest level since 2007 after breaking out of a multi-month base three weeks ago.

There's a time to be aggressive and go for big gains, and there's a time to shoot for higher probabilities with smaller payout potentials.

I'm finding it hard to muster any conviction to go either long or short right now, as I can make compelling cases for both the bull and the bear thesis here.

In today's tape, my feeling is we need to err on the side of being too conservative and trade with a margin of safety.

So today, we're putting on what I feel to be a conservative, delta-neutral options trade in the technology sector ETF $XLK.

This is the video recording of our October 3rd Monthly Charts Live Strategy Session

From the Desk of Alfonso Depablos @Alfcharts

Sellers have a hold on equity markets as internal weakness expands and downside momentum picks up.

When looking for evidence of additional downside risk, some of the most valuable information we have is in the price action of the weakest areas. The rationale is that they should break down first and lead the rest of the market lower.

With how poorly the smallest stocks have performed this year, the Russell Microcap Index $IWC is the perfect signpost to help us determine the next move for stocks. 

The chart below shows IWC resolving to the downside from a descending triangle formation. It just closed at its lowest level in roughly three years.