From the desk of Willie Delwiche.

It’s difficult to stay on top of things if you don’t periodically pause for reflection. 

What did you do yesterday that you want to do more of tomorrow? What do you want to do less of tomorrow? Rarely is any single day a make or break situation. But success over time is about leaning into the things that work and leaning away from the things that don’t work.

From an investing perspective, it’s about trusting prices and their trends. This involves tilting toward the parts of the market that are moving higher, while avoiding areas that are moving lower. It’s about avoiding “should” and dealing with “is”. The market is dealing with a negative reaction to disappointing data from several stocks that are in well-established downtrends as I type. That really shouldn’t be that big of a surprise. Stocks making new lows tend to be those in downtrends, while those making new highs tend to be those that are in uptrends. That’s the way the world works.

Last week I mentioned ordering seeds and starting to plan the summer garden. In addition to taking stock of what we had left from last year, we also had to...

Picture this.

One of your close friends asks you about technical analysis. What do technicians do? "What even is technical analysis?" they ask.

Your first instinct is to dive down the rabbit hole of charts, indicators, and intermarket analysis. After your rambling, your friend is even more confused than before they asked.

That's the common mistake, one of the primary reasons why technical analysis often gets such a bad rap.

In the same way you wouldn't describe geography as the study of seismometers or biology as the field of microscopes, you'd be selling technical analysis short by arguing it's the study of indicators.

You guys know me by now. I'm not exactly "Mr. Seasonality" where we follow seasonal trends tick for tick.

That's not how markets work.

BUT, I do think it's important to put things into context. In fact, 2021 followed seasonal trends better than any year in recent memory.

Take a look at last year's tracking of our Cycle Composite. That was right on point wasn't it?

We're buying the $CVX January 2024 150-strike call options. Yes LEAPS!

Check out our short video with the thought process behind this trade:

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...

From the desk of Steve Strazza @Sstrazza

We held our February Monthly Strategy Session Tuesday night. Premium Members can access and re-watch 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.

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

The path of least resistance is higher for yields, as the market continues to punish investors for buying bonds. 

As long as that’s the case, we want to look for short opportunities when approaching the bond market.

Since the shorter end of the curve has ripped higher, the moves in these contracts and ETFs are extended. They simply don't offer favorable risk/reward trade setups at current levels.

We’re better off looking for ways to play rising yields further out on the curve in this environment. 

We’re going to discuss how to do just that by covering a few charts that are setting up on the short side.

First up is the 30-year Treasury bond futures:

T-bonds are carving out a multi-year head-and-shoulders top above their pivot lows from last March.

We want to sell weakness on a decisive break below the neckline and those former lows at 153’07, targeting the 2019 lows around 136’16.

We can only be short on a...

From the desk of Willie Delwiche.

With the weight of the evidence turning neutral and our tactical risk management model arguing for more caution, we have reduced our equity exposure and raised some cash in our Cyclical and Tactical Opportunity Portfolios.

If you've been involved with crypto, you've probably heard the term "whales" thrown around countless times. There's an almost conspiracy-like aura surrounding this cohort of Bitcoin holders.

With an incredible amount of attention placed on this trader cohort, it's important to understand their role in driving price action, macro trends, and more importantly, following their movements.

So, first things first, what even is a "whale"?

[10/19/23: updated stop to 155]

We're taking a Leap here.

The overwhelming majority of options trades we put on at All Star Options tend to be structured in a way to participate in moves that should take place within 2-8 months. The shorter duration trades are usually trades where we are net short premium (naked puts, short strangles, bear call spreads, etc), whereas our longer-term trades tend to be ones where we are net long premium at attractive prices (in volatility terms).

Today, we're doing something we've never done here. We're making a long-term bet utilizing LEAP options.

"LEAP" is an acronym for Long-Term Equity Anticipation Securities. Essentially, this means we're taking a position in options that have greater than a year until expiration.

If you were on the @allstarcharts twitter SPACES chat this morning (every trading day at 11:30ET), you heard us riffing on today's trade.

From the desk of Willie Delwiche.

Key Takeaway:  Investor sentiment looks washed out - at least for now. Investor sentiment was a headwind early in 2021 but more recently had been a neutral market influence from our weight of the evidence perspective. Now, with the indicators pointing toward fear and pessimism and equity inflows sputtering to start 2022, it looks like sentiment now is a tailwind for equities. How long that persists remains to be seen. Seeing pessimism and fear remaining elevated even as if stocks stop going down could help sow the seeds for an unloved rally. Longer-term, there remain imbalances from a valuation and asset allocation perspective that remain unresolved.   

Sentiment Report Chart of the Week: Equity Fund Inflows Sputter

Equity ETFs saw their 20th consecutive month of inflows in January, but last month’s inflows were the smallest since October 2020 and a sharp slowdown...