From the Desk of Ian Culley @IanCulley

Here’s what happened last week...

A few bad actors used open profits from highly leveraged positions to purchase other assets.

When those highly leveraged positions turned against them – ripping their faces off – margin calls went unanswered, leading to a lack of liquidity.

Bonds ripped, stocks dipped, and credit spreads blew out. 

Now that the dust is settling, let’s review a few takeaways from last week’s volatility and consider what may lie ahead.

Credit Spreads Had it Right

Bonds hinted at a stock market correction months ago as widening credit spreads failed to confirm new all-time highs.  

The increasing stress on credit markets culminated in the High-Yield $HYG versus US Treasuries $IEI ratio blowing out to its lowest 14-day RSI reading since September 2008:

From the Desk of Steve Strazza @Sstrazza

Have you heard about the rally in the bond market?

After a severe multi-year drawdown, bonds have carved out a massive basing pattern and are putting the finishing touches on a primary trend reversal.

More importantly, interest rate-sensitive stocks are following suit and rallying higher as rates come down.

The sector with the highest correlation to bonds, Real Estate, is also putting the finishing touches on a bearish-to-bullish reversal.

With the market under pressure in recent weeks, Real Estate's relative strength and resilience stands out in a big way.

This once left-for-dead group of stocks is now the sector leader over the trailing month and quarter.

The only responsible thing for us to do is dive beneath the surface and find the strongest individual names to use as vehicles to play this trend.

Before we do that, let's set the stage.

Here is a look at those multi-year bases in bonds and real estate. Notice how they look the same:

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

I love it when a group of people dislike a stock for reasons that have nothing to do with the stock itself.

In some cases it's because they don't like the CEO, or they don't like the politics of the players involved, or they think the stock is some kind of fraud.

In the case of Palantir, you're getting all 3 of these.

We love it when a stock hitting new 52-week highs makes people sad.

That built-in short-squeeze scenario is just added fuel to the fire to send stocks much higher, much faster.

Here is PLTR hitting new multi-year highs this week:

I was in the city this week hanging out with my pals Josh Brown, Michael Batnick and Joe Fahmy.

For some perspective, 10 years ago in March of 2014, the 4 of us went out one night to support some other friends of ours at a charity event. I met my future wife that night. 

These 3 guys mean a lot to me. But don't let my love for them fool you. When they say something dumb, I'm going to call them out on it!

Check out the full podcast episode that just dropped last night on The Compound & Friends. 

From the Desk of Ian Culley @IanCulley

Stocks aren’t the only risk assets falling this week.

Rebar, Corn, and Cotton are posting multi-year lows. Dr.Copper is slipping below four bucks. And our short cattle trades are working.  

But as most commodities slide, one area (aside from precious metals) is finding its feet.

Notice the CRB Index is carving out a two-year base while our equal-weight index hits its lowest level since early 2021:

The disparity between the two indexes comes down to their construction. 

We weigh 33 commodities equally for our index, so rebar futures carry the same weight as crude oil. 

On the other hand, crude comprises almost a quarter of the CRB Index.

These stark contrasts reveal two pertinent themes: broadening weakness among commodities and emerging relative strength from energy.

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 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 ServiceNow, Palantir, and MercadoLibre.

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:

From the Desk of Steve Strazza @Sstrazza

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 this one, 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.

From the Desk of Ian Culley @IanCulley

Let everyone grumble over the Japanese yen.

I get it. The yen was cast as the villain decades ago, and something or someone must take the blame for the VIX hitting 65 earlier this week.

While I prefer to point my finger at the preceding low-volatility environment, the November election, and potential rate cuts, the yen certainly played a part. 

But the real question isn’t who, what, when, where, or why. 

Instead, every investor wants to know…Was that it? 

Is the selloff over?

I think the worst is behind us. 

Here’s why…

Check out the USD/JPY chart with a 200-day simple moving average in bright blue (with the percentage above or below the long-term average in the lower pane):

In many ways the yen carry trade is a play on interest rates.

BlackRock just filed for a "Nasdaq Top 30" Stocks" ETF.

That's the top

This is the company that runs the iShares ETFs.

NOW is when they want to launch a vehicle for investors to buy ONLY the top 30 Nasdaq stocks?

Now?

Where was this 10 years ago?

To me, this type of sentiment is just further evidence that Technology has peaked as a percentage of total market cap in the stock market.

This sort of top-heavy hype is confirming what price is already suggesting.

Look at Technology hitting new 10-month lows today relative to the S&P500:

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.

The feeling of gratitude that I have this morning is overwhelming.

So I just wanted to take a moment to say Thank You.