From the desk of Willie Delwiche.

There was plenty of focus on the Fed this week - not so much for what they did (which was nothing), but for what they said. After a benign written statement, Fed Chair Powell took to the podium at his post-FOMC meeting press conference and spent a lot of time talking about how inflation has been more persistent than the Fed had hoped it would be.  From the Fed’s perspective it is now time to raise rates rather than to let the negative effects of sustained higher inflation fester in the economy. Data released in the wake of the FOMC meeting shows that higher inflation remains persistent, in terms of both degree and duration. 

Inflation based on the Trimmed Mean PCE is at its highest level since the early 90’s, based on the Core PCE it’s at its highest level since the early 80’s.There are only a few times in the history of this data that inflation has risen this many months in row. The only times we’ve experienced a more sustained rise in inflation were in 2012 (coming off the secular low) and in the 1970’s. So far this cycle the Fed has aided & abetted inflation, going forward it’s poised to fight it.

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This is the video recording of our January 28, 2022, All Star Charts Crypto Weekly Strategy Session.

For anyone that joined me, JC, and Strazza on the Twitter Spaces this morning, you heard us scratching our heads on what to trade next.

In this sloppy tape, there just aren't any real compelling opportunities we can find worth getting aggressive with. When the best idea on the table is "buy $QQQ above 350," then you know we're struggling for good directional bets.

But that's ok. We options traders don't just need directional markets to make money. We can take advantage of sideways action too!

And that's what we're going to continue to do with today's trade.

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

The Federal Reserve is doing its best to prepare the market for what is expected to be a year of rate hikes. But investors aren’t exactly enthusiastic about this outlook, as stocks came under further pressure following Wednesday’s Federal Open Market Committee announcement.

The bond market is also offering some valuable information again. And considering the recent volatility, it’s more important than ever to listen closely.

When we think about bonds, credit spreads are always top of mind, as they’re a great barometer of market health. When there's stress on risk assets, it shows up in credit spreads. 

When analyzing credit spreads, all we’re doing is measuring the difference in yield between a Treasury (the safest bet) and a corporate bond (riskier asset) of the same maturity. If these spreads begin to widen, it’s usually problematic for equities.

We can also study these relationships by comparing the bond prices themselves, instead of their yields. One of our favorite ways to do this is...

This is the video recording of the January 27th Weekly Town Hall w/ Willie Delwiche

01/27/22 2:00 PM ET

From the desk of Willie Delwiche.

What a week…  

What a month…  

What a start to the year!

We’ve seen pockets of strength in the market. But by and large, it’s been a tough slog to start 2022. In the words of an All Star Charts colleague, it’s starting to look a bit like “no-man’s land” out there as stocks have tried (but generally failed) to produce some positive momentum after the worst start ever to a new year. 

Even if we were able to get back above some key levels, where would that put us? Back into the sideways mess that characterized most of 2021. Not breaking down is a necessary – but not sufficient – condition for breaking out.

Editor's Note: Before we dive into the substance of today's note, I want to be sure you're all aware that our Crypto Friday Live Strategy Session will get started tomorrow, January 28, at 3:00 p.m. ET.

See you tomorrow at 3:00 p.m. ET.

Relative strength.

We talk about it all the time -- and for good reason. If these last few years have reinforced anything, it's the power and efficacy of incorporating relative strength into our approach.

You can never outperform if you don't hold assets that are doing exactly that, outperforming.

Given that trends are more likely to continue than reverse, if a group of assets have outperformed their alternatives, it's more likely than not they'll continue to do so.

One of the primary components of...

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

Buying stocks below overhead supply has always been a bad idea for me.

I don't know about you, but it's usually been nothing but frustration in my experiences.

You see, that's when stocks go down in price. When they're being overwhelmed by selling pressure.

So as I've grown older I've gotten much better at avoiding situations where I own things below resistance.

Trust me, you go through it enough and you eventually stop.

The bottom line is this: If the Nasdaq100 is below 350, there's nothing to talk about from the long side.

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...

From the desk of Willie Delwiche.

Key Takeaway: US stocks are on the ropes after taking a series of heavy hits in recent weeks. This comes against a backdrop of rising volatility and fear, fueling an increase in pessimism. A complete unwind from speculative extremes is underway as a market that once bent under pressure is now beginning to snap. The silver lining is that there are still pockets of strength among cyclical/value sectors, like energy. The question is whether or not this can remain the case in the face of widespread pessimism.    

Sentiment Report Chart of the Week: Leadership Rotation Gets Energetic

The energy sector is picking up steam despite the recent selling pressure among US stocks. The sector is having a great month to start the year (+17%) and this week saw one of the largest 1-day return spreads between XLE and XLK on record (22nd overall). In fact, seven of the top 25 events have come since the COVID-related market lows. After taking a backseat to tech for more than a decade,...

One of the most underappreciated elements about Bitcoin is the transparency of transactions. This enables us to gain deep insights into the behavior of investors and users of the network.

The growing industry of on-chain analysis looks to address the concerns of those who wish to categorize, cluster, and ultimately analyze entity behavior to find increasingly reliable and actionable signals.

Blockchain mechanisms mean analysts and traders have access to a wide array of data that isn't possible to replicate in traditional asset classes, like stocks, commodities, and bonds.

One of the key metrics we've found to be of tremendous value is quantifying investor supply and demand through the use of supply shock.

In today's note, we'll outline how we use this data to supplement our traditional price work and technical analysis.