From the desk of Steve Strazza @sstrazza

This is one of our favorite bottoms-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 their direction and make them a pretty penny.

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 bottoms-up scan, "Under The Hood."

To make the cut for our Minor Leagues list, a company must have a market cap between $1 and $2B. There are also price and liquidity filters. Then, we simply sort by proximity to new highs in order to focus on the best players only.

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 context of the big picture 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.

From the desk of Steve Strazza @Sstrazza

Our Top 10 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.

From Failed Moves Come Fast Moves

Markets have been unequivocally choppy. Breakouts are failing, new highs are dwindling, and it’s becoming more challenging to find trending opportunities. Last week, we discussed how Semiconductors failed to breakout, and asked whether its peer industries would follow suit. Well, we have our answer now… One of the strongest industry groups in the last two months, Internet, just printed a failed breakout at its February highs. Software looks frighteningly similar.

Digging into some of the components, Amazon, the largest weighting of the group, is in the process of retesting its September 2020 highs of 3550. And to compare the industry group to one of its peers, Semiconductors have also put in a failed breakout. 

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

One of the main themes we discussed in the Q3 Playbook we published last week is the lack of any directional bias for equities on a relative basis.

We’ve been obnoxious about the trendless environment for equities on an absolute basis... and now we’re noticing a lot of the same play out in many of the relative trends we monitor.

When there is no edge on absolute terms, we can at least try and generate alpha by taking advantage of relative trends through pair trades.

But, right now there’s really nothing out there giving us an opportunity to do so. This is about as rough of an environment for money managers as you’ll find.

All we see is sideways, sloppy, range-bound action… Standard year-two stuff!

To illustrate what we mean, let's take a look at each large-cap sector SPDR relative to the S&P.

We'll start with the “growthy” sectors.

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

Opportunities are springing up in the commodity space!

Yes, energy, base metals, and (especially) precious metals continue to consolidate below overhead supply.

But this doesn’t necessarily speak to weakness… 

In fact, much of the sideways chop in commodities is taking place at logical levels of resistance. And aside from the dramatic sell-off in lumber, we see more upside resolutions than violations of critical support levels.

We recently pointed out that base metals managed to hang tough in the face of a significant correction in copper. And this week, tin is breaking out to new all-time highs.

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

It's a tale of two markets. 

The weight of the evidence remains mixed across asset classes. We also continue to see more and more risk assets struggle at overhead supply. This is particularly true for equity and commodity markets.

From an intermarket perspective, most risk appetite ratios and risk-on relative trends are either moving lower or are rangebound.

Simply put, there's little in terms of directional edge for investors. The data remains split right down the middle -- and there are sound arguments for both the bull and bear case.

Although the information we're getting from the Bond Market is much more consistent these days. And what we're seeing is suggesting lower yields for longer.

Let's take a look... 

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

Several weeks back, we discussed the fact that new lows were non-existent across just about all of the major averages in the US.

It’s pretty hard for a market of stocks to decline in any meaningful way without an expansion in downside participation. And we just aren't seeing any signs of this when looking through our breadth chartbooks and new low indicators - not even on shorter timeframes. This remains the case today.

We've been pounding the table on our view that this is nothing but a messy market, as well as the fact that many significant risk assets are chopping around key resistance levels.

So you would think this would be an excellent opportunity for the bears to take control… But, they just can't seem to get it done! Let's dive into some of our breadth and sentiment indicators and see what they're currently saying about this.

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

Thanks to everyone who participated in last week’s mystery chart.

We asked whether the chart could make a decisive upside resolution out of its consolidation pattern, or if this level will continue to act as resistance and keep a cap on prices.

The responses were mixed, with many wanting to wait for more information. In many cases, people were looking for confirmation of a breakout.

The chart was a daily candlestick view of the iShares Semiconductor Index ETF $SOXX.

Not much has changed since we first posted the chart. In fact, price has yet to make a decisive move from this key level. Let's dive in and see what's happening and where it's likely headed.

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

Check out our latest Mystery Chart!

What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.

This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.

It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!

The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.

While you can try to guess the chart, the point is to make a decision…

So, let us know what it is… Buy, Sell, or Do Nothing?

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

As risk comes off the table in this messy market, we want to continue to look for opportunities to bet on the US Dollar.

Bonds are catching a bid. Procyclical commodities are consolidating below overhead supply. The AUD/JPY is rolling over. The Yen is strengthening. And of course, King Dollar has begun to reassert its dominance. 

Consider all this defensive posturing within the context of the choppy year-two environment we're in, and it appears investors are really beginning to seek shelter from the storm.

And what’s one of the most popular safe-haven assets?  

The USD.

From the desk of Steve Strazza @Sstrazza

Dividend aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.

As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.

Here at All Star Charts, we like to stay ahead of the curve. That’s why we’re turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for 5-9 years.

We call them the Young Aristocrats, and the idea is that these are “stocks that pay you to make money”. Imagine if years of consistent dividend growth and high momentum & relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.