A funny thing happened last summer.

Financials as a sector successfully retested the highs in price from just before the start of the Great Financial Crisis.

Look at the 2007 peak in Financials. After testing that level and failing in 2018 and 2020, prices ultimately broke out.

Last summer was the retest.

Former Resistance turned into Support:

It's the weekly bond edition of What the FICC?

The relative strength of Emerging Market bonds shores up the ongoing bottoming process for risk assets.

Check it out!

From the Desk of Ian Culley

It’s impossible to ignore – investors are reaching for risk.

Biotech stocks are catching higher. Copper futures are working on their tenth up-day in a row. Even the Emerging Market HY Bond ETF $EMHY is breaking to 7-month highs as it completes a multi-month base. 

And don’t forget about Silver! Gold’s crazy cousin has proven by far the best-performing asset since the US dollar peaked last fall. Strength among these market areas indicates a healthy risk appetite.

I can’t overlook these signs of a constructive bottoming process, especially considering the next chart…

Check out the Emerging Market Bond ETF $EMB relative to the US Treasuries ETF $IEF:

There’s plenty to unpack here…

First, the EMB/IEF ratio is challenging fresh 7-month highs after posting a higher high and a higher low last fall. A bearish to bullish trend reversal is underway for this important risk-on ratio.

You can add this to the growing list of...

I got a lot of feedback on my last letter where I suggested active traders need to stop trading Covered Call spreads for tactical trades and instead do a simple Naked Puts trade.

Thank you to everyone who engaged.

Anyway, here’s one question [edited to the important parts] I got from a reader where I thought my answer might be instructive to more of you:

Hi Sean,

I read your information on naked puts. When I intend to buy a stock, I would like to sell a put. I just don't know how to go about it. I just don't know where the strike price would be. I understand that I would have to buy the stock at that price (whether it is better or worse than hoped).

If you could give me an example that would help.

Cheers!

This is a great question, but one without a clear-cut answer. Here was my response:

From the Desk of Kimmy Sokoloff

It was very whippy price action today in individual names.

We saw a lot of stop outs in the morning, then some recovery later on.

Forget cryptocurrencies. Look at these crypto stocks!

Seriously, some of these moves have been nuts.

We took a small long in MicroStrategy $MSTR at the lows, and it hit our 50%-plus target in just two weeks.

Crazy...

If cryptocurrencies are going to start trending higher -- which is our bet -- these stocks face serious resistance.

But let's approach this with a level head.

This is the video recording of the January 19th, 2023, Weekly Town Hall w/ Willie Delwiche.

1/19/23 2:00 PM ET

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

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

The next new position 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:

From the Desk of Kimmy Sokoloff

As of this morning we filled a gap on $SPY at 390.65.

If we continue to stay below 390, there's potential to see 386. 

Today’s Hot List is a short one, as insider activity has cooled with the broader equity market this week.

The only insider transaction was a Form 4 filing by EcoR1 Capital LLC.

The underperformance out of U.S. Large-cap Growth indexes continues.

It's not the stock market's fault that the S&P500 has way too much exposure to large-cap growth.

And when we talk about "the stock market", there are countries outside of the United States that continue to shine.

Today's Chart of the Day shows the S&P500 hitting new 52-week lows relative to Developed Countries outside of North America:

It's the weekly currency edition of What the FICC?

The US dollar index $DXY registered a "death cross" last week, confirming a bearish trend reversal.

But it's not the confirmation of the dollar downtrend that has my attention. It's what the signal suggests for stocks in the coming months and quarters.

Check it out!

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

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, to 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.

But the scan doesn't just end there.

We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey...

From the Desk of Kimmy Sokoloff

The market took a breather today. $SPY hit 400 and backed off again.

We broke below the 200-day moving average and the eight-day moving average at 393.10. 

From the desk of Willie Delwiche.

Dynamic Portfolio Update: With new highs outpacing new lows every day so far this year, our net new high A/D line has turned higher and moved our "Fear or Strength" tactical model into its bullish zone. We are following the model and increasing risk exposure in the Tactical Opportunity portfolio.

From the desk of Willie Delwiche.

The Investors Intelligence measure of advisory services sentiment shows Bulls rising to their highest level in over a year. Bears have not (yet) undercut their summer lows and the Bull-Bear spread is still just below its August peak.    

Why It Matters: We need bulls to have a bull market. This flies in the face of a desire to only see sentiment from a contrarian perspective. The way I learned it, it pays to go with the crowd until it  reverses at an extreme. After the persistent and excessive pessimism of 2022 (which was certainly present in word if not deed), the best prospects for a sustained rally at this juncture is for investors to shift their attitudes and embrace stocks. A failure for investors to turn more optimistic at this juncture could hasten a longer-term positioning re-balance. We have gotten hints of that in recent weeks as ETF flows show investors eschewing US equities in favor of international equities and fixed income ETFs.  

In this week’s Sentiment Report we...

This is the video recording of our January 18, 2023, Inside Scoop Weekly Strategy Session.