We asked whether the chart could make a decisive upside resolution out of its consolidation pattern, or if this level will continue to act as resistance and keep a cap on prices.
The responses were mixed, with many wanting to wait for more information. In many cases, people were looking for confirmation of a breakout.
The chart was a daily candlestick view of the iShares Semiconductor Index ETF $SOXX.
Not much has changed since we first posted the chart. In fact, price has yet to make a decisive move from this key level. Let's dive in and see what's happening and where it's likely headed.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
Check out our latest Mystery Chart!
What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So, let us know what it is… Buy, Sell, or Do Nothing?
Consider all this defensive posturing within the context of the choppy year-two environment we're in, and it appears investors are really beginning to seek shelter from the storm.
And what’s one of the most popular safe-haven assets?
Dividend aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for 5-9 years.
We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money”. Imagine if years of consistent dividend growth and high momentum & relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.
This is one of our favorite bottoms-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.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
Check out this week’s Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the context of the big picture and provides insights regarding the structural trends at play.
Let’s jump right into it with some of the major takeaways from this week’s report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Global Yields Threaten European Equities
Last week we discussed the underperformance of European banks and the potential implications in the near term for risk-taking behavior.
This week, these suspicions were confirmed when price fell back below a key level, confirming a failed breakout. Similarly, the MSCI United Kingdom ETF, one of the most important economies within Europe, was unable to break above a significant resistance level around 34. Now, both are trapped below overhead supply.
If European financials and UK stocks are trapped below their pre-covid highs, it’s consistent with an environment where markets remain messier for longer and risk assets are vulnerable.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Overhead supply is a theme we're seeing all over these days. And this isn't just true for the stock market, but it's also dominating the commodity landscape.
Crude Oil reached our objective of 76 and turned lower. Copper remains stuck below its former 2011 highs. And Gold has been an absolute mess since peaking last August.
Even the few commodities that have recently broken above resistance zones -- such as Gasoline and Heating Oil -- have yet to follow through and confirm their new highs in any meaningful way.
Remember, commodities have enjoyed some explosive moves over the past year. Now, many are at logical levels to pause and digest recent gains. This is healthy stuff. Normal market behavior.
Our apologies for the late delivery as we've all been so buried in charts preparing our Q3 Playbook that we forgot about this week's column!
As many of you know, something we’ve been working on internally is using various 'bottoms-up' tools and scans to complement our top-down approach.
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 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.
The market environment directed our focal point toward the Dollar. And now that it appears risk is coming off the table, we’re shifting our focus to the Yen.
Usually, when we talk about risk-on/risk-off behavior and the Yen, the AUD/JPY is at the center.
This is one of our favorite bottoms-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.
