From the Desk of Ian Culley @IanCulley

Are investors really buying bonds, betting on a squeeze higher?

Perhaps it’s just my Twitter feed. (Or are we calling it "X" now?)

I’m perplexed by the growing chatter around picking the bottom in bonds.

Warning: Picking bottoms is never a good look.

It’s unbecoming, especially when there are zero signs of a reversal. (The same applies to tops.)

I understand the Nasdaq 100 had its best first half – like, ever.

But what does that have to do with yield charts?

Rates continue to rise worldwide.

Here’s a look at Germany, France, Portugal, and US benchmark rates:

All are steadily grinding higher following explosive advances last year. Yet none have decisively resolved to the upside from their respective multi-month ranges. 

From the Desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as "a market of stocks."

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions. But there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club.

We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports.

Now, we're also highlighting lagging stocks on a recurring basis.

Welcome to the Short Report.

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is the most important chart in the world, again.

But, honestly, when is it not?

There’s no hiding from King Dollar.

It’s true: Currencies are not considered one of the three major asset classes (bonds, stocks, and commodities).

Nevertheless, fluctuations in the US dollar impact every asset worldwide – especially stocks and commodities. 

And the probability of renewed headwinds for risk assets is increasing as the failed breakdown in the dollar could have legs…

Check out the triple-pane chart of the DXY, our G-10 currency index, and the US dollar advance-decline line:

Today on the Morning Show, JC was talking about bitcoin and how if you want to underperform the next leg higher in crypto, then own bitcoin. But if you really want to get some juice for the next crypto rally, the crypto mining stocks are how to participate!

In particular, both JC and Strazza like Riot Platforms $RIOT and Marathon Digital Holdings $MARA.

And specifically, we all like what could have been a recent "oops" or fakeout-breakdown that may have just shaken out all the weak hands, clearing a path for the next move to new cycle highs:

With $MARA flirting with breaking back above $16.00 per share today and implied volatility in the options near yearly lows, it feels like high time to catch the whipsaw back to highs.

Over the past few weeks we've been positioning ourselves for a Regime Change.

It's not so much the end of the world that's coming, as it is just healthy, normal sector rotation.

See: If not Tech, then What?

The most important chart that helps to explain what's going on is the S&P500 and Nasdaq100.

This is what being stuck below overhead supply looks like:

From the Desk of Steve Strazza @Sstrazza.

Welcome back to Under the Hood, where we'll cover all the action for the week ended August 4, 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.

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.

From the Desk of Ian Culley @IanCulley

The stars have not aligned for gold bugs.

Rates and the US dollar are both catching higher – the opposite of what would likely ignite a precious metals rally.

Yet gold continues to hold above its former 2011 highs! 

Despite these setbacks, my bias remains bullish for gold.

But my desire to own the strongest assets is shifting actionable trade setups toward more profitable opportunities…

Remember in the back half of last year, when virtually everything was working EXCEPT for Tech stocks?

Well a funny thing happened early in 2023, money rotated into Tech and other Large-cap Growth.

These Tech stocks did so well, that people who are bad at math convinced themselves, and others around them, that it was only 5 or 7 stocks going up.

That was hilarious.

And while it definitely wasn't just 7 stocks, but thousands of stocks ripping in your face all year, Technology was certainly the leader along the way, particularly on a market-cap weighted basis.

But that relative strength has been rolling over the past few months as momentum has also diverged negatively.

Doesn't that make perfect sense during a regime change?

Take a look at a chart of Technology relative to the S&P500 already making new multi-month lows:

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

It took most investors over a year to realize stocks had been in a bull market that whole time.

And now that, "breadth is finally improving" and, "the recession isn't coming", you get the classic rug pull and rotation into defensive sectors.

We held our August Monthly Strategy Session Wednesday night. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month.

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.