From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @AlfCharts
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.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Bonds Lead
First bonds, then stocks, and now commodities have rolled over, following the traditional intermarket cycle. If the pattern holds, we should expect bonds to bottom first and eventually lead the way higher. With yields on the rise, there are no signs of this yet, but even a transition to a sideways trend could bring some stability to other asset classes.
In a busy morning for oil and gas deals, Continental Resources $CLR announced a merger agreement with the company founder and billionaire Harold Hamm.
Over the weekend, Hamm boosted his original offer from this summer to purchase the existing $4.3 billion worth of shares that he and his family do not already own for $74.28 per share.
There is a constant conversation among market participants about which indexes are the better representation of the stock market, particularly in the United States.
While the media often quotes the Dow Jones Industrial Average daily changes, professionals tend to steer towards the S&P500.
The argument normally revolves around the price-weighted nature of the Dow Jones Industrial Average vs the market-cap driven S&P500.
The diversity of 500 stocks in the S&P is also a key point when compared to just 30 stocks for the Dow.
Today, I just wanted to remind everyone why I think the Dow Jones Industrial Average is underrated and why I think it is still one of the most useful indexes for any stock market participant.
High Positive Correlation With The S&P500
First of all, the Dow Jones Industrial Average and the S&P500 have a very high positive correlation to one another.
In yesterday's note we talked about how the Dow Jones Industrial Average went up in price for the 2nd consecutive week. This isn't something we've seen happen too often in 2022.
But what else happened this week?
Well, we got fewer stocks making new 52-week lows on the NYSE. The peak in new lows was back in June, which was 4 months ago.
You can see it in shorter-time horizons as well. Look at the S&P500 new 63 day low list continuing to deteriorate (63 days = 3 months = 1 quarter):
From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs. We’ve also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
