From the desk of Willie Delwiche.

Key Takeaway:

• Patient investors will let the bulls prove their case.
• Economic risks on the rise as data disappoints.
• Central bank action adding pressure to market and economy.

When we look at the data we have in hand, avoiding recession is looking more and more like a dubious proposition. Last week’s retail sales data showed that adjusted for inflation, retail sales in May were below year ago levels. While COVID-related distortions have added to the volatility in sales data, the last three recessions  have all been associated with year over year declines in retail sales. XRT (the Retail ETF)is currently more than 40% below its November peak and the two prior times it found itself in a 40% drawdown (2008 and 2020), the economy was already in recession. New orders data from the Philly Fed show an...

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...

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

 

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

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

The largest insider transaction on today’s list comes in a Form 4 filing from Allied Physicians of California.

The firm reported a purchase of roughly $9.2 million in Apollo Medical Holdings $AMEH. It now owns about 11 million shares for a total ownership interest of 19%.

This is the video recording of the June 2022 Mid-month Conference Call.

We discussed:

• The S&P500 and Dow Jones Composite stuck below overhead supply
• Major US Indexes are below their AVWAPs from the COVID lows
• 30 consecutive weeks of more stocks making new lows than new highs
• Seasonality could become a tailwind in July
• Sentiment is as bad for stocks as I've ever seen
• Relative strength out of Chinese Internet and other "culprits"
• Bitcoin near important support
• The US Dollar controls all of this. All eyes on DXY
• Breadth Deterioration in Commodities
• Long opportunities in Financials
• Defensive Sectors are vulnerable
• Gold is still below overhead supply
• Copper/Gold ratio breaking down pointing to lower rates
• Japanese Yen hits new multi-decade lows
• Buy the dip in bonds? I think so

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.

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

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.

Structural Damage For Smalls

Equities all around the world are having a brutal start to the summer as selling pressure spreads across the board. All of the US major averages are completing tops and registering new closing lows. 

The Small Cap Russell 2000 Index has been the weakest as IWM is currently testing a critical support zone at its 2018 and 2020 highs. We will be watching closely in the coming days to see how prices react to this area of former resistance turned support.

Bulls want to see this level hold. However, if price violates these former highs, we have to anticipate another leg lower and increased selling pressure for stocks more broadly. Seeing more and more risk assets fall back below their 2018 and 2020 highs is a big feather in the hat for bears. The S&P 500 is still about 7% above its 2020 highs of 3400.

...

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:

• This week, our macro universe continued lower again as 89% of our list closed in the red with a median return of -4.69%.
• The Volatility Index $VIX was the winner, closing with a 12.18% gain.
• The biggest loser was Dow Jones Utilities $DJU, with a weekly loss of -9.46%.
• There was a 7% drop in the percentage of assets on our list within 5% of their 52-week highs – currently at 4%.
• 9% of our macro list made fresh 4-...

How's the Bear Market treating you?

We're going on over 16 months of this so far, and counting....

Remember, stocks peaked in February of 2021, meaning that was the best things were for stocks during this cycle. And it's been a slow deterioration ever since.

The first stocks to peak are what we refer to as the "Culprits". Every bear market has that group that you can point to as the leaders to the downside.

We came into 2022 with a close eye on those Culprits (see here) and we've continued to monitor their declines.

If you haven't been following along, those groups include Chinese...

From the desk of Louis Sykes @haumicharts

Naturally, after a drawdown like the crypto markets have endured, this is the part of the cycle where everyone tries to call a bottom. Of course, we don't need to discuss the dangers of this treacherous journey of bottom-calling where many traders eventually meet their fate.

There is perhaps no worse setup for active traders than in environments like these.

Times like these are when volatility is rampant, emotions are elevated, and bad decisions are made.

But, there are two antidotes:

1. Don't trade, be patient, and buy when upward momentum returns.
2. Dollar cost-average in the value zones.

For the most part, we continue to hammer down the first point. Going back to December, we've been preaching patience and high cash positions.

But today, we want to address the potential credence in the notion of Bitcoin dollar-cost-averaging in the context of this recent selloff.