What a difference a few days makes, eh?

On Monday morning, if you were on twitter or watching the teevee you'd have assumed the stock market was about to get cut in half and the pitchforks were going to be lining up outside the Federal Reserve building in Washington, D.C.

Then, the market did what the market does and now here we are with the S&P 500 looking like it wants to make another run at all-time highs.

Forget about market volatility --- how about trader's emotional volatility?!

With this in mind, there is still some nice options premium being priced into individual names that offer us some unique tactical opportunities for some quick gains.

There hasn't been much to cover as far as new developments in the cryptocurrency market are concerned.

Bitcoin, Ethereum, and friends have been consolidating and correcting for the better part of two months now. We experienced some volatility in early December, but the damage was quickly repaired. Outside of this, things have been quiet. It's really just been a slow grind lower or sideways for most cryptos since November.

We continue to believe this is a messy market, and patience is the best course of action for a large majority of coins.

Let's recap some of the things we're looking for to signal the recent corrective action has passed. Then we'll check in on some of the leaders as we want to focus on these pockets of strength as they should continue to outperform when the current selling pressure subsides.

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

Major world currencies continue to struggle against the US dollar.

Both the euro and British pound have been coiling near 52-week lows against the dollar. We’re also seeing weakness spread among commodity-centric currencies, as the Canadian dollar hit new 52-week lows this week, and the Australian dollar accomplished the same earlier in the month. As for the safe-haven Japanese yen, USD/JPY hit its highest level since 2017 at the end of November. 

The bottom line is that we continue to see broad strength from the greenback.

Meanwhile, the US Dollar Index $DXY continues to consolidate within a tight continuation pattern.

As we wait for a resolution either higher or lower, we can look to these individual forex pairs for an indication of which direction we’re likely headed.

Let’s revisit the potential failed breakdown from the Australian dollar earlier in the month and the recent action in the...

From the desk of Willie Delwiche.

Key Takeaways:

• Tactical model argues for caution heading into 2022
• Absence of a breadth thrust leaves market looking for energy elsewhere
• Liquidity indicator remains supportive but Macro Sentiment and Breadth point to rising risks

There was a story in the WSJ earlier this year about a fund manager who held 900 of his best ideas in his main mutual fund. I saw a model this summer that was made up of nearly 100 individual momentum  indicators. Some will use a double-digit number of categories for gauging the market. One more holding, one more indicator, one more lever - it’s as easy as adding one more column in the spreadsheet. If more is better that is great, the question though is at what point is more just too much.

Information, even when useful, can easily pile up and become overwhelming. This adds to, rather than reduces noise. Distillation is an ongoing challenge in this age of distraction. There is a tension between focusing on as much as we need to, but as little as we have...

It's not a secret around here that market breadth started to deteriorate in February.

If you recall, that's when everyone had a SPAC.

The IPO index peaked, ARK Funds, Biotech, the new highs list, etc all stopped going up.

That was over 10 months ago.

But more recently, market breadth is getting all the attention. Everyone is a breadth expert now, you notice?

I'm even getting software developers asking me about my breadth analysis wishlist so they can build it for me. Which I love and I certainly appreciate, but just goes to show you another sign of the times.

The way I see it, if you're trying to get defensive NOW because of breadth deterioration, I think you might be looking at it completely wrong.

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...

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We’ve already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottom-up scan, Under the Hood.

We recently decided to expand our universe to include some mid-caps…

For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but it’s time we branch out a bit and allow some new stocks to find their way onto our list.

The way we’re doing this is simple…

To make the cut for our new 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...

Two weeks ago, we detailed why we're sitting on the sidelines with an expectation of sideways price action to close the year.

Fast-forward to today, and the same diagnosis applies for Bitcoin and the broader crypto asset class. The macro risk environment is beginning to favor the bear camp, and it's certainly not a time to be aggressively pushing longs.

Meanwhile, the spot flows seen on-chain continue to diverge from price action, suggesting that once this consolidation phase is complete, an upward break appears to be the higher likelihood scenario.

We're watching for Bitcoin to reclaim 53,000 before we put our elevated cash back to work in positions.

Until then, we're avoiding a good majority of trading action in this low-conviction tape where whipsaws have become commonplace.

One nice thing about recent stock market volatility is that there are some bullish setups we can take advantage of with some clearly defined nearby risk levels, which give us entries with solid reward-to-risk scenarios.

And of course, in a theme we've been repeating over the past week, this volatility is also helping us more easily find where the hidden relative strength is.

So let's dive right into an idea that was surfaced in the recent Hall of Famers report.

From the desk of Willie Delwiche.

Key Takeaway: Falling bond yields do not inspire confidence. Industry group trends faltering as breadth weakens. Holiday cheer has already turned sour.

• After last week’s big jump from Consumer Staples (which held in at #4 this week), it was Utilities making a big move (from #9 to #6) in the rankings. Defensive groups are seeing strength on an absolute basis (more on that in a moment) and that is translating into higher sector rankings and improving conditions at the industry group level.
• Real Estate has taken over the top spot in the rankings while cyclical sectors seem to be in a race to the bottom.