With the NFL Playoffs getting underway this weekend (Go Bills!), it's time we put the offense on the field!

I was kicking around a bullish idea in a consumer staples name during our Analyst meeting today. The chart looks great. The setup is good. We can position for a nice potential reward versus the risk we'd incur to put the trade on. Everyone agreed that its probably a good trade.

But... is it aggressive enough?

Answer: No, it's not.

The thinking that emerged from our chat was that risk is back on in the stock market; therefore, we need to get into the most reasonably aggressive names we can. And one of the areas where risk is most definitely "on" is in the homebuilders sector.

If all we did was watch the evening news or listen to the inflation and interest rate scaremongers, we'd reasonably conclude that a long-term and painful bear market for real estate and housing in particular is a slam dunk. No contest.

If a severe real estate bear market was in the cards, would we be seeing homebuilders ripping of their recent lows the way we have over the past couple of months?

Check out this chart of Toll Brothers $TOL...

From the Desk of Ian Culley @IanCulley

Is the dollar going to finally bounce?

As I pointed out last week, if there was ever a place or time – it's’ now! But that doesn’t mean it’ll happen…. 

One thing is certain: The markets don’t care what I think. This includes the US dollar.

But when I look at a chart of the EUR/USD, the largest component of the US Dollar Index $DXY, it’s running into a logical level of resistance.

How the euro reacts to current levels will set the tone for the dollar in the coming weeks and months.

Check out the daily chart of the EUR/USD:

First, let’s break down momentum in the lower pane.

The 14-day RSI has broken out of a bearish momentum regime, printing a bullish overbought reading last month. This indicates momentum has shifted in...

You seeing this?

Riot Blockchain $RIOT is rebranding to Riot Platforms "amid a bleak outlook for the crypto industry."

You can't make this up.

Only after the stock has stumbled into a 96% drawdown do they change the name of the company.

Historically, Industrial stocks are the ones with the highest positive correlation with the overall market, among all the S&P sectors.

Financials are obviously important. We don't have bull markets around here without them.

Technology has also been important, considering it has the highest weighting among all the sectors in the U.S.

But when you run the numbers, it's actually Industrials that comes out on top.

Industrials are officially the market's most important sector.

And so when we take a look at how they're behaving, I'm still not seeing the weakness that most investors keep telling me is coming.

In fact, look at Industrials breaking out to new multi-year highs relative to the rest of the market:

In the Spring of 2022, JC came to me and said: “What do you think about managing an options income portfolio for me? I’m looking for some more strategy diversification in my portfolios. It doesn’t need to be anything sexy, just steady.”

Ok, I’m probably paraphrasing a bit, but that was the gist of his ask.

So I got to work on putting a plan together for him. When we looked at it together, it became obvious that we should offer this portfolio to the All Star Charts community who might also be interested in some further diversification. Even if people don’t take our trades, it could be a productive learning experience for everyone.

So we got to work and we launched the All Star Options Paid-to-Play (P2P) service in May 2022.

Each trading day, we either enter a new delta-neutral options credit spread in a liquid ETF (from a list of the most liquid Index and Sectors ETFs), or we play defense on an open position with an adjustment to put us in a better position to win. And we leave resting GTC (good-till-canceled) limit orders to close our credit spreads at profit targets which get filled periodically at the whim of the markets.

So far...

First Santa Claus showed up for his rally.

Now the "First 5 Days" of the year were up (+1.37%).

That's 2 for 2 so far in the January Trifecta.

So now what's next?

The January Barometer is the last leg of the early year triple crown.

"As January goes, so goes the rest of the year". According to my handy Stock Trader's Almanac, the S&P500 has an 83.3% hit rate for the full year when January is in the green.

So with more and more positive signs for stocks, it really shouldn't be a surprise to anyone.

From the Desk of Steve Strazza @Sstrazza.

Welcome to Under the Hood, where we'll cover all the action for the week ended January 6, 2023. This report is published bi-weekly and rotated with The Minor Leaguers.

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.

Click here for a behind-the-scenes look at our process.

Whether we’re measuring increasing interest based on large institutional purchases, unusual options activity, or simply...

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...

From the Desk of Ian Culley @IanCulley

Have you noticed precious metals printing fresh highs?

Last week, gold posted new multi-month highs. So did silver and platinum, hitting their highest levels since the spring of 2022.

Not a bad start to 2023 for these shiny rocks. And it gets better!

Gold broke out to new all-time highs relative to bonds last week. The yellow metal is not only showing strength on an absolute basis – it’s also outperforming its alternatives.

These are classic bull market characteristics and two critical pieces of evidence suggesting gold is in the early stages of a new structural uptrend.

If gold is on its way to new all-time highs, gold mining stocks will be participating. 

And it just so happens they are…

If gold prices rise, companies that remove gold from the ground and sell it will surely benefit. Simple!

...

I was back on The Compound & Friends show this week.

But this time I brought ASC Director of Research Steve Strazza with me.

This show is always a lot of fun and this time was no different.

We don't take ourselves too seriously and like to enjoy ourselves. So this is the perfect show for us to come on.

We discussed the Bull Market in stocks that continues to broaden out to new sectors and countries, the potential breakout in Gold prices to new all-time highs, how the US Dollar falling apart is impacting asset classes, and some of our favorite stocks to profit from the current environment.

We also discussed our Bitcoin trade, Chinese Internet and the ASC Hall of Famers.

Big shoutout to Josh and Michael for the invite.

I love being a guest on one of my favorite shows to watch! I know Steve Strazza feels the same way.

Enjoy!

If you're not making money in this environment, it's not because it's a "bear market".

Don't be one of those investors left holding the bag in the few remaining stocks that are not working, while almost everything else is.

On an equally-weighted basis, every single sector is up since the bear market ended last June.

Here's the performance of each of the Sectors since the new lows list on the NYSE peaked in Q2. Notice how Consumer Discretionary is the best performer. How can consumer discretionary stocks doing so well possibly be a bad thing?

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

The major commodity indexes look ready to roll despite sustained strength from precious metals.

Check it out!