From the desk of Willie Delwiche.

Key Takeaway: Lower prices have a way of souring investor moods. It’s a relationship that thrives on the feedback loop it creates. Increased selling pressure begets pessimism that fuels continued selling pressure. With the recent relief rally behind us, short-lived optimism has dissipated and bearish sentiment is on the rise  (II bull-bear spread challenges its lowest level since the GFC and Consensus bulls fall to their lowest reading since the Covid crash). It’s hard to claim sentiment is washed out as long as pessimism is still expanding. And based on the disparity between investor moods and positioning, there’s still plenty of gas in the tank for the bears.

Sentiment Report Chart of the Week: Household Liquidity Near Historic Lows

The Fed’s latest report on the Financial Accounts of the US (otherwise known as the Z.1) shows that household liquid assets increased by slightly more than 2% in the first quarter. Compared to total financial assets (which were down nearly 2% in the quarter), household liquidity improved slightly. Household non-equity liquid assets rose from 17.9% of...

From the Desk of Louis Sykes @haumicharts

I'm not sure about you, but these last few weeks have further reinforced my love and passion for crypto.

You know this crypto selloff has been severe when even the media outlets and evening news programs in tiny, old New Zealand are covering it.

Even after years of being with the All Star Charts crew, my family still has no idea what I do every day. Charts? Technical analysis? Cryptocurrencies? You write research? For who?

These are the questions I'm constantly asked. It's pretty hilarious.

So when I try and explain the headlines they're reading behind Luna, Ethereum crashing, or who this Do Kwon dude is, I'm often met with blank stares.

Spending my days obsessive and immersed in crypto feels like a video game. This whole industry and community are on an entire other planet.

To quote our Head Technical Analyst at All Star Charts, Steve Strazza: "Bullish setups are hard to come by these days."

Yeah.

But, for those willing to venture into the choppy waters, recent market action has provided us with some nearby risk management levels that give us the opportunity to act quickly if we're wrong, limiting our losses while giving us multiples of potential profit (as measured against the risk).

And today's idea comes from the only sector to show YTD gains this year.

What's not to like about that?

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

The largest insider transaction on today's list is a Form 4 filing by Ernest Garcia II, CEO and co-founder of Carvana $CVNA.

Garcia II reported an additional purchase of roughly $42 million of his own stock.

From the desk of Steve Strazza @Sstrazza

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 five to nine 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 and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.

By adding our technical analysis...

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

King Dollar is reasserting its reign at the expense of major global currencies and risk assets.

What started as a potential failed breakout last month is proving no more than a hard retest, as the US Dollar Index $DXY broke to fresh 20-year highs yesterday.

Even the most resilient currencies, such as the Canadian and Australian dollars and the Mexican peso, are losing ground against a surging USD.

As we’ve pointed out, this is not an ideal scenario for risk assets – particularly stocks.

Yesterday’s price action was a great example – dollar up, stocks down. 

This is not a coincidence.

Let's zoom out and analyze the dollar’s recent strength and then discuss what it means for these other asset classes.

Here’s a daily chart of the US Dollar Index:

...

From the desk of Willie Delwiche.

It remains a risk off environment. With the indexes breaking down (S&P 500 at lowest level of the year and Value Line Geometric Index back to where it was in the Summer of 2017) and selling pressure intensifying, we are trimming our equity exposure. This helps increase our liquidity (which tends to be a scarce and valuable asset in periods of turmoil) and leaves us well positioned to lean into opportunity when our bull market re-birth checklist improves.

From the desk of Willie Delwiche.

While there were some hints of a “throwing the baby out with the bathwater” type of environment yesterday, the selling for now seems more consistent with evidence of weakness that could continue than exhaustion that could produce a turn. The NYSE TRIN (a measure of selling and buying pressure) spiked to a new cycle high near 3.5. Outside of periods of stress, this is about as high as it gets. In periods of turmoil, it can move much higher (it peaked above 5 in 2015, above 7 in 2011 and approached 10 in 2008). NYSE volume was tilted 60-to-1 to the downside and new lows on NYSE+NASDAQ surged higher (though remained shy of their May peak). 

Our Risk indicators suggest there is no need to rush toward Risk On positioning. The longer-term Risk On / Risk Off Indicator has been in Risk Off territory all year and moved sharply lower after yesterday’s broad-based selling (at one point in the day, all 504 stocks in the S&P 500 were down on the day). The intermediate-term...

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

There's no hiding the fact that we've had little to discuss in the way of tactical trading opportunities.

To avoid repeating ourselves, we're continuing our patient approach. You can read yesterday's note or last week's for more detail.

Speaking anecdotally, crypto traders specifically seem incredibly susceptible to a subconscious bias that they always have to be positioned. Everyone's trying to bottom-tick the market to fuel their ego.

It's a rookie's mistake, and the reality is far from the truth.

Maintaining the ability to sit out is not only a necessity in markets like these, but I'd argue should be the default option for traders.

The old saying is that there's only a handful of periods every year to make money. You're being patient for the rest of the year, waiting for the setup to form.

This perfectly encompasses our approach.

The largest insider buy on today’s list is a Form 4 filing by David Goeddel, independent director at NGM Biopharmaceuticals $NGM.

Goeddel disclosed the purchase of approximately $13.2 million worth of shares in the small-cap biotech company.

The market has been finding it excruciatingly difficult to hold don to higher levels. This time we have a sell signal coming from another big name. Let's take a look at this, shall we?

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.

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.

They’re doing so for one reason only: because they think the stock is about to move in their...

Key Takeaway:

• Stocks and bonds weighing on portfolios.
• Federal Reserve faces a credibility test of its own making.
• Turmoil usually ends after something gets broken - this time it may be investor resolve.

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest Under the Hood column where we'll cover all the action for the week ended June 10, 2022. This report is published bi-weekly and rotated with our Minor Leaguers column.

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.

Watch this video for a behind-the-scenes look at our process.

Whether we’re measuring increasing interest based on large...

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.

Yen Leads Rates Higher

The Japanese yen has been front and center, and for good reason. It won’t stop falling. Notice the strong relationship between the USD/JPY cross and the US 10-year yield illustrated in the overlay chart with a 26-day correlation study in the lower pane. Interestingly, this strong positive correlation all centers around the Bank of Japan’s effort to put a cap on interest rates. They achieve this by going into the open market to purchase Japanese Government bonds. As such, the BOJ has to reduce US Treasury purchases, and this is putting upward pressure on the US 10-year yield. As long as this remains their strategy, the strong relationship between these markets should hold.

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:

• Our macro universe continued lower this week as 83% of our list closed lower with a median return of -3.91%.
• This week, the Volatility Index $VIX was the winner, closing with an 11.94% gain.
• The biggest loser was Lumber $LB, with a weekly loss of -10.81%.
• There was a 4% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 11%.
• 11% of our macro list made fresh 4-week highs....