From the Desk of Steve Strazza @Sstrazza

Markets have been on the ropes since late last week when a Silicon Valley Bank press release sparked a run on regional banks. 

As Wall Street scrambles to reprice the financial sector -- for what, up until last week, were unforeseen risks -- selling pressure and panic is spreading to Europe and other parts of the world.

Regulators are taking action. And the Fed is taking notice as expectations for future rate hikes plummet.

While Bitcoin and tech stocks have performed exceptionally well through the volatility, cyclical stocks and commodities have been hit hard, with energy and the CRB Index breaking to new lows this week.

What are we to make of all this? Should we be concerned?

Is the regional banking crisis a contained event, or is it about to send reverberations through the broader market and economy? 

Whenever we have questions like these, the first place we want to look is the bond market. 

Any signs of stress tend to show up there first.

Let’s analyze the recent price action and see how...

I’ve received a few emails over the past few weeks from people who had long calls trades that went their way – a good problem to have. But they had questions about how to manage them.

They hear me often talking about selling half of my calls when they’ve doubled in value, giving my original risk capital back, while also offering a risk-free ride on the remaining half position. This is a Best Practice I frequently employ.

The question is some variation of: “Ok, great advice. But how do I do that if I only purchased a one-lot?”

For the record, I trade a ton of one-lot trades, especially on higher-priced stocks. So I’m very aware of this issue.

To take profits out of a winning long calls trade while still remaining exposed for more upside, there are two options that I prefer:

Ever since the 2-year yield bottomed in Q1 of 2021 Technology stocks have struggled. Growth became the worst place to be.

It was NOT a coincidence that once those rates started to rise in early 2021, the Nasdaq New Highs list peaked, the Nasdaq Advance-Decline line peaked, all the ARK Funds peaked, Chinese internet peaked, Biotech peaked and everyone piled had into SPACs before they all came crashing down.

Because the 2-year yield was rising so fast, and the longer end of the curve couldn't keep up, we got the mother of all yield curve inversions.

The media loves to scare people with it because I think an inverted yield curve has predicted something like 50 of the last 8 recessions.

But now it's bon voyage yield curve inversion. Good riddance!

We're seeing the largest 5-day rate of change in the yield curve since the early 1980s:

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...

All things considered, the tech sector is holding up well. This gives me some comfort that this is an area we can sell some delta-neutral options premium to ride out this market volatility.

But we're going to do so carefully, defining our risks and playing it conservatively.

Check out this chart of the Technology Sector ETF $XLK:

The horizontal lines on this chart represent areas we can sell April options premium at that feel far enough away for me to like our odds.

We're going to get involved with an Iron Condor.

These are the registration details for our Live Mid-month Conference Call for Premium Members of All Star Charts.

Our Live Call will be held on Monday March 20th at 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.

Here are the details for Monday night:

From the Desk of Ian Culley @IanCulley

Fear runs rampant across financial markets as the US Dollar Index $DXY prints fresh one-month lows.

Wait… what?

I thought the USD was a safe haven.

Perhaps it is. But it appears the gig is up for King Dollar after being the only game in town for almost a year.

So what now, buy stocks?

Sounds good to me.

And I think we can start buying other global currencies too…

Check out the EUR/USD pair:

The euro is swinging back toward our risk level of 1.08 after failing to hold its breakout earlier this year.

It’s pretty straightforward. If and when it reclaims our breakout level, we’re long targeting 1.1450.

Remember, last month, the 1.08 level was our line in the sand. Below there, a USD rally had potential.

On the flip side, if the euro trades above that level, dollar bulls will have a tough time and risk assets will likely enjoy a significant tailwind...

People love the idea of entering options trades with a high probability of success. It’s easy to be seduced by the prospect of winning on 60, 70, or even 80 percent of our trades.

It doesn’t take much imagination to enjoy visions of swimming in all the cash we’d surely be earning with such a strategy. And why not? With that kind of win rate, we’ll often go on runs where we win on multiple trades in a row.

Talk about a confidence builder!

Of course, there is no free lunch on Wall Street. And in strategies with a high probability of success, there is a dark underside that people conveniently like to ignore.

This type of discussion quickly makes us unpopular at cocktail parties. So we avoid it. Many know, but most are unwilling to talk about it.

The trading action in...

They say to buy when there's blood in the streets.

Does this count?

Hardly.

Many indexes around the world are just a few basis points from new highs. Most stocks in America have been rallying for 9 months.

But sure, there's a little blood, with some of these small regional banks disappearing. But depositors are keeping their money, so the only cost is a few people lost their jobs.

Good. Unemployment is way too low anyway.

From the Desk of Ian Culley @IanCulley

Strength begets strength.

Buyers taking control of a market heading into the weekend exude confidence. That describes gold bulls last Friday as they drove prices higher into the close.

To no surprise, Gold kicked off the new week gapping higher and rallying more than 2.5%. We call this bullish follow-through. 

So what’s next for precious metals?

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 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.

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...