This is our ASC Research Q3 2022 Playbook.

Investors have a lot of questions right now. With sentiment and at some of the most pessimistic levels in history, what will it take for some of these trends to change in the second half of the year? I believe some major trends are already changing.

The Playbook takes a step back and looks at things from a more Structural perspective. If you're specifically looking for more tactical opportunities, you can check out this week's Live Mid-Month Conference Call.

Here's what we'll be discussing in our Q3 Playbook:

• Stocks (International & U.S.)
• U.S. Sectors & Industries
• Market Breadth & Sentiment
• Commodities
• Currencies
• Intermarket Analysis
• Cryptocurrencies
• New Trade Ideas
• Overall Strategy

From the Desk of Ian Culley @IanCulley

The US dollar and interest rates are still two of the most important charts out there. You’re probably tired of hearing it, but their future direction impacts the entire marketplace.

And, believe it or not, the currency market provides a great read on both.

Bullish data points continue to roll in left and right, supporting dollar strength. From the Korean won and Singaporean dollar to the euro and the pound, the dollar seems to break out against another currency every few days. 

No matter where we look, the US dollar is dominating. 

When we evaluate the trends in emerging market commodity currencies, it reveals insight into the recent rise in interest rates. Instead of showing strength, these currencies are catching lower -- which doesn’t jibe with a rising rate environment.

Let’s take a look.

Here’s an overlay chart of the US 10-year yield and our Emerging...

From the desk of Willie Delwiche.

The current imbalance between job openings and unemployed persons gets plenty of attention. That there are twice as many job openings as there are people looking for a job is a historically unique situation. Having more job openings than job searchers, however, is not unprecedented. That was also the situation in 2018 and 2019, though the emergence of COVID seems to have washed that from our collective awareness. I can still clearly recall discussing skilled worker shortages with small business owners in the Midwest. The policy responses (both fiscal and monetary) to COVID exacerbated these imbalances, but the seeds of the current wage and price pressures were being sown before lockdowns and social distancing became a reality. 

This suggests a more deeply embedded issue for the economy in terms of reducing wage and price pressure than many (even those at the Fed) appreciate. The relative scarcity of workers may also mean that employers will be less likely to reduce headcount in the face of economic headwinds than they have in the recent past. Looking at average weekly hours and...

The next new trade in our Paid-to-Play portfolio is:

We had a resting GTC order filled at our profit target in the Paid-to-Play portfolio today:

Yesterday, we explained how we're still approaching this recent rally with a high degree of caution.

Most names still find themselves below overhead supply, and this is a tape where whipsaws and fake-outs are likely to continue.

Beyond Ethereum and a handful of other names, this rally hasn't been widespread. Instead, most cryptos are still exhibiting generally weak action.

While this means there are still actionable ideas out there from the long side, we want to explore a higher-conviction trade over more substantial time frames that'll likely be prone to fewer whipsaws.

The Auto sector has been the flavor of the season. And by the looks of it, the season isn't over yet! We're here today to discuss another popular stock from this sector.

Shares of Apple stock just went out at the highest levels in history relative to the S&P500.

This is what we refer to as "Relative Strength".

Apple had originally peaked relative to the market almost 2 years ago towards the end of the summer of 2020.

That's when the Apple's underperformance first began.

And now here we are making new all-time highs once again:

We retired our "Five Bull Market Barometers" in 2020 to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

Warren Buffett filed his latest Form 4 yesterday, as Berkshire Hathaway $BRK continues to accumulate shares of Occidental Petroleum $OXY.

The additional 1.94 million shares leaves him with an ownership percentage just shy of 20%.

This is the video recording of the July 2022 Mid-month Conference Call.

We discussed:

• 34 Straight Weeks Of More New Lows Than New Highs
• Strong Negative Correlation between Stocks & Dollars
• DJIA & DJTA holding short-term support so far
• S&P500 Remains Below overhead supply
• Small-caps & Financials testing significant support levels
• Europe's STOXX 600 back to 2000/2007 highs
• Apple hits new All-time Relative Highs
• US 10yr & 30yr Yields run into 2018 highs
• Breakevens & EW Commodities peaked months ago before Yields
• Still no expansion in the new 20 day highs or 63 highs lists
• Commercial Hedgers remain historically long Crude Oil
• Gold, Silver & Gold Miners break down to new 52-week lows
• 10yr Minus 3-mo Yield Curve breaks down to follow 2s-10s
• Bitcoin & Ethereum hold above former cycle peaks
• New Trade Ideas: Both Long & Short

From the desk of Steve Strazza @sstrazza

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...

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.

For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.

That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.

We expanded our universe to include some mid-caps.

To make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.

And it doesn’t have to be a Russell component — it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe.

The same price and liquidity filters are applied. Then, as always, we sort by proximity to...

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts 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.

ETH Kicks Off Crypto Rally

It was a busy weekend for cryptocurrencies, and Ethereum, in particular. The world’s second-largest crypto just resolved higher from a bearish continuation pattern right at a key polarity zone. 

When patterns fail, it’s always great information. In this case, a downside resolution in the direction of the underlying trend was the higher probability outcome, but it didn't happen that way. Instead, buyers took control and forced an upside resolution. Another thing that makes this price action stand out is where it took place. Ethereum just dug in and reversed after a brief shakeout beneath the 2017 highs. As long as we're back above the prior-cycle peak of 1400, the bias is higher.

Key Takeaway:

• Stocks celebrating small wins.
• For evidence to improve we need to see sustained strength.
• Fed confronted with deteriorating economy while still waging inflation fight.

When new lows have exceeded new highs for 34 weeks (and counting) and the Value Line Geometric Index (a proxy for the median US stock) is no higher now than it was five years ago, even small amounts of good news get celebrated. We saw some of that on Friday.

A decline in the longer-term inflation expectations number in the University of Michigan Consumer Sentiment Survey helped fuel a broad stock market rally. Recall that it was an unexpected uptick in inflation expectations in the preliminary June data that prompted the Fed to raise rates by 75 basis points last month. Odds of a 100 basis point rate hike at next week’s FOMC meeting had been on the rise following the release of unexpectedly hot readings for CPI and PPI. By the...

From the desk of Steve Strazza @Sstrazza

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 big picture context 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.

Macro Universe:

• This week, our macro universe was negative as 79% of our list closed lower with a median return of -1.14%.
• Lumber $LB was the winner, closing with a 3.49% gain.
• The biggest loser was Copper $HG, with a weekly loss of -8.18%.
• There was a 4% drop in the percentage of assets on our list within 5% of 52-week highs – currently at 2%.
• Only 9% of our macro list made fresh 4-week highs.
• Meanwhile, 38% of our list...

Feels like market conditions are improving a bit for the bulls, but we're still going to be picky here. One way we can improve our odds of success is to align our trades with relative strength.

Today's trade is in a sector that has seen both improving absolute price strength, and a widening relative strength gap compared to the broader stock market.

We've exited a position in the Paid-to-Play portfolio today:

From the desk of Louis Sykes @haumicharts

In recent months, we've argued in favor of a defensive approach.

Last week, we made our strategy rather clear with the following dialogue:

With the market providing extreme readings, these are conditions by which we can anticipate a mean-reversion rally higher. At the same time, trying to catch this move in a period of continual whipsaws will be difficult.

We think the better trade is to remain patient over the near term while dollar-cost averaging into long-term spot positions with a multi-year time frame.

Over the weekend, we've seen a sharp rally higher, driven by Ethereum $ETH.

Director David S. Taylor of Delta Air Lines $DAL revealed a purchase of 10,000 shares in the airline company, valued at just under $300,000.

Meritage Group LP filed a 13G revealing an ownership stake of 5.70% in the cloud-based business management platform Coupa Software $COUP.