Recently I've been listening to a wider variety of music than I have in the past. It's by design.
Each week, I've assigned myself a little goal to listen to a new album. I set aside a few hours to actively listen and immerse myself in the music -- to relax, of course, but also to consider the themes and overall messages artists are trying to convey.
It's been fun, and I'm enjoying it immensely. And it's also helped me become a better writer and opened my outlook on life more broadly.
Music is powerful. I can't imagine life without it. And one particular track from my personal list of top 10 classic hip hop pieces of all time has been stuck in my head all day.
We got just a little bit of Dollar weakness starting in mid-July and stocks ripped higher. Thousands of points added to the Dow, Ethereum doubled and the average stock on the Nasdaq rallied over 40%.
We saw one of the most historic short-squeezes in history. And all it took was just a little bit of Dollar weakness. It wasn't even that much.
But then once that Dollar strength came back last month, the bid in stocks and crypto disappeared.
Welcome back to Under the Hood, where we'll cover all the action for the week ended September 2, 2022. This report is published bi-weekly and rotated with our Minor Leaguers report.
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.
Watch this video for a behind-the-scenes look at our process.
Whether we’re measuring increasing interest based on large institutional purchases, unusual options...
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...
Remember when the stock market peaked in February 2021?
That's when the New highs list peaked. That's when the Nasdaq Advance-Decline line peaked. That's when Chinese Internet Peaked. That's when Biotech peaked. That's when all the ARKK funds peaked.
February 2021 is when everyone had a SPAC.
Remember SPACs?
This group of "Special Purpose Acquisition Companies" was a poster-child for the excess environment of Q1 2021.
These SPACs were the biggest pieces of hot garbage on the market. And everyone wanted them.
And then the market peaked and their prices came tumbling down.
Now here we are, 18-months later. And they've just decided to delist the SPAC ETF $SPAK.
We’ve been loud about energy lately. And how can we not be?
Energy stocks were the most resilient during the H1 selloff and are by far the best-performing sector off the 2020 lows. Every afternoon, energy quietly leads the pack into the close, whether the market is green or red on the day.
But the recent rally in stocks has started to fizzle. And even energy is beginning to feel the downside pressure.
While everyone scrambles to label the recent rally, gearing up for the next leg higher, or preparing for the world's end, we want to focus on the leaders – energy!
If this leadership group starts to fall, it could be an early warning sign of broad selling on the horizon.
And, with Labor Day upon us, it just so happens the energy sector ETF $XLE is retesting a critical shelf of former highs.
Here’s a chart of XLE:
Like many cyclical areas of the market, XLE reclaimed its prior-cycle highs during the...