We’re buying an $MPC Feb/Apr 70 Call Calendar Spread for around a $1.10 debit. This means we’ll be short the February 70 calls and long an equal amount of April 70 calls for a net debit

Check out our short video with the thought process behind these trades:

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. 

The point is that 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.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

With the exception of US large-caps, the market remains range-bound for most risk assets. At the same time, most defensive assets are failing to catch any meaningful bid.

Gold is still chopping around in the middle of its year-to-date range. Bonds continue to trend sideways or lower. The Japanese yen recently hit its lowest level since 2017. 

And while the defensive sectors recently made multi-month highs versus the broader market, they're still trading near 20-year lows on a relative basis.

These are the kinds of assets we expect to catch a bid in an environment where investors are fleeing for safety and positioning defensively. But we’re just not seeing that.

At the same time, we haven’t seen many definitive signals supporting a more risk-on tone… until now!

While our risk-appetite ratios remain a mixed bag and most are simply range-bound, we just got a meaningful upside resolution in the High Yield versus Treasuries ratio.

The ratio of high-yield corporate bonds versus US Treasuries has been consolidating beneath a critical level of...

I'll spare you the suspense -- we're getting long Marathon Petroleum $MPC here.

The title of today's post is not a trite pun. We are indeed positioning for a bullish move, but it may take a little bit to develop the way we want it to.

Thankfully, the beauty of options trading is that we can craft a strategy that takes advantage of a slow-developing play. So let's get right to it.

It's important to zoom out and really put what's going on into perspective.

You hear a lot about how much money is being created with fed money printing and the Powell and senator Karen yelling into the air for no reason.

It's all been well documented.

We're seeing unprecedented numbers being raised by companies issuing equity and debt, as highlighted here by the FT:

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

As 2022 approaches, the latest evidence from currency markets suggest the US Dollar Index $DXY could be stalling out.

Whether it resolves higher from the current continuation pattern is a key question with broad market implications. While dollar strength has been a headwind during the second half of 2021, we think it cools off coming into 2022.

In our view, there's a good chance a weaker dollar will actually help put a bid in risk assets in the near future. This hasn’t been the case in a while, so let’s discuss what’s changed to make us feel this way.

Notice the short-term weakness in our US dollar trend summary table:

The percentage of short-term bearish readings has jumped from 13.37 to 60.00 over the past two weeks. This tells us there's been a significant drop-off in the dollar’s strength versus its peers, even as the DXY coils in a tight bull flag.

Bulls want to see the dollar get stronger beneath the surface to support a resolution...

From the desk of Steve Strazza @Sstrazza.

Welcome back to our latest Under the Hood column, where we'll cover all the action for the week ended December 24, 2021. This report is published bi-weekly and rotated with our Minor Leaguers column.

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.

...

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...

These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.

This month’s Video Conference Call will be held on Monday January 3rd @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.

Here are the details for Monday evening:

Wall Street sell side analysts are coming out with their 2022 forecasts.

And we all know how accurate those tend to be ;)

In the latest float of the bear parade, wall street's sell side analysts are putting out some of the most bearish forecasts in recent memory.

From the WSJ,

And we already know that Individual investors (AAII) and Financial Advisors (II) are much more bearish going into 2022 than they were over the prior two years.

We're seeing almost half the amount of...

As we enter the final week of the year, what's on your mind?

Let us know. We love to hear from you!

I'll go first.

People are so scared. They're afraid of their own shadows.

And they're quick to blame others instead of looking in the mirror.

At first glance, this might seem sad. But sad for who?

Just because you're angry doesn't mean the rest of us have to be.

I see it as opportunity.

The official period for this year's Santa Claus Rally begins on Monday December 27th.

Remember, the Santa Claus Rally includes the last 5 days of the year, and the first 2 days of the following year. So this year's SCR starts on Monday Dec 27th and runs through Tuesday Jan 4th.

The first half of December wasn't the best time for stock investors. But keep in mind that historically, it's the second half of December that's the most bullish time of this month for stocks.

So what should we expect for this year's Santa Claus Rally?

Well, for me it's less about Santa showing up and more about the implications of him not showing up.

Let me explain.