From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Defense wins championships. 

It’s important to remind ourselves of this as risk continues to come off the table.

The largest stocks in the world are losing critical support levels, and even the leaders are coming under pressure. Bonds are catching a defensive bid, credit spreads are as wide as they’ve been in years, and investors are fleeing to the dollar for safety.

Meanwhile, the classic risk barometer – the AUD/JPY – is breaking to fresh lows.

This all speaks of defensive positioning.

Here’s a daily chart of the AUD/JPY:

Just a few weeks ago, the AUD/JPY was rallying to its highest level since the summer of 2015. Now it’s more than 7% off those highs. And as of this writing, it has slid more than 250 pips in today’s session alone.

This...

Jan Barta of Pale Fire Capital revealed an additional purchase of roughly $23 million in Groupon $GRPN, as he continues to build a position.

The CEO and the president of OPKO Health $OPK revealed a purchase of approximately 400,000 shares of his company's stock in a Form 4 filing.

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

Credit spreads are widening to their highest levels since late 2020.

If it feels like we just mentioned spreads and the falling HYG/IEI ratio, it’s because we did – and for good reason! They provide valuable insight into the overall health of the market.

High yield bonds $HYG rolling over faster than US Treasuries $IEI implies stress on credit markets and trouble for equities.

This is critical information.

We’ve been closely following the HYG/IEI ratio for months as it repeatedly tests the lower bounds of its range. It broke down to fresh lows in March, only to bounce higher with many risk assets.

Two months later, this crucial risk ratio is printing fresh 52-week lows again. The main difference is that the overall market environment has drastically changed since the last time we were at these levels.

Even the strongest stocks can’t catch a bid as investors...

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 some...

This is the video recording of our May 11, 2022, Inside Scoop Weekly Strategy Session.

I think it’s safe to say insiders are buying the dip!

This might be the most Form 4 filings we’ve seen in a single day since we started doing this.

And we’re seeing activity in all different sectors, from software to chemicals, including even casinos.

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

Despite the rising US Dollar Index, strength among commodity-centric currencies has been a key theme for much of this year. 

Today, that’s no longer the case.

The rally in the USD is accelerating, as dollar strength broadens to even the most resilient currencies. 

Two of the top commodity currencies – the Australian and Canadian dollars – are undercutting the lower bounds of their current ranges and making fresh 52-week lows.

These breakdowns mean the path of least resistance is now lower. If these are valid resolutions, we’re looking at increased headwinds for risk assets.

Let’s look at a couple charts of the AUD and the CAD, highlight the levels we’re watching, and discuss what continued weakness in these major currencies means for stocks and commodities.

First up is the Australian dollar-US dollar cross:

...

The most significant insider transaction on today’s Hot List is a Form 4 filing by the CEO of Uber Technologies $UBER, Dara Khosrowshahi.

The Silicon Valley executive revealed a purchase of roughly $5.3 million of his own stock.

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 reason only: because they think the stock is about to move...

From the desk of Steve Strazza @Sstrazza

Welcome to our latest Minor Leaguers report.

We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 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 the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.

That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.

The way we did 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 universe.

The same price and liquidity...

From the desk of Steve Strazza @Sstrazza

Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.

By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.

Let's jump right into it with some of the major takeaways from this week's report:

* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.

Macro Universe:

• This week, our macro universe was red as 70% of our list closed lower with a median return of -0.55%.
• The 30-Year Yield $TYX was the winner again this week, closing with a 9.30% gain.
• The biggest loser was the Volatility Index $VIX, with a weekly loss of -9.61%.
• There was a 2% gain in the percentage of assets on our list within 5% of their 52-week highs – currently at 13%.
• Only 9% of our macro list made fresh 4-...

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Losing Value

Markets have been selling off indiscriminately since last week. Even the strongest stocks are under pressure as we're seeing more and more indexes resolve lower from distribution patterns and violate critical support levels. An excellent example of this is the small cap value ETF (IWN). IWN has successfully defended its range lows for the past several months as its peers have broken down. Now that it has resolved to the downside too, we can add it to our growing list of completed tops. If the strongest can't survive and hold their levels, what does that say about the rest of the market? Long story short, this action is not bullish.