From the desk of Willie Delwiche.

Key Takeaways:

• Custom Risk On / Risk Off Ratio breaking out of an 8-month consolidation
• Risk On environment favors Emerging Market strength and leadership from Financials
• Intermarket analysis shows higher risk assets outperforming across multiple timeframes

Our ‘Risk On’ / ‘Risk Off’ Ratio is getting back in gear after spending most of 2021 going sideways. The ratio first peaked in February and while it visited and revisited that level multiple times as Spring became Summer, which then became Fall, it had not been able to break out until last week. The improvement in the ratio has been fueled by both an up-turn in the ‘Risk On’ index and a more pronounced down-turn in the ‘Risk Off’ index. On the following pages we will take a closer look at what is driving improvement in one and deterioration in the other.

The break-out in our ‘Risk On’ / ‘Risk Off’ ratio is consistent with the improving momentum backdrop being seen at the sector level and would be consistent with a more...

In yesterday's note, we exercised caution given that Bitcoin achieved our upside target and the growing leverage in the derivative markets.

The strategy for the coming days/weeks is that if Bitcoin is below 65,000, the bias is sideways to lower in the near term.

But when we look out longer-term, the skies could not be any bluer for the asset class.

We're in the camp that Bitcoin will eventually resolve higher, and when it does, it would be irresponsible to NOT be positioned aggressively long crypto.

We're not just talking Bitcoin, but also the altcoins, and even the crypto stocks.

So let's zoom out and identify the backdrop of accumulation that has and continues to take place on-chain.

One of the often underappreciated elements of crypto is the transparency of transactions that enables us to really see what's happening in the market. The vast majority of our analysis in traditional markets is conducted through price charts because price reflects the intimate dynamic of supply and demand. But in crypto, on-chain trends are...

Now for the risk on developments that we've seen in recent weeks. As you can see here Consumer Discretionary stocks are breaking out relative to Consumer Staples.

If there is one cheat code in the stock market, this may be it.

The bottom line is this: if Discretionary is outperforming Staples, shorting stocks is not the best of strategies:

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 in their direction and make them a pretty penny...

From the desk of Steven Strazza @Sstrazza

*** Click here to read the reveal post for this Mystery Chart ***

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?

Just like that, Bitcoin hit our upside objective.

Now, patience is warranted as demand begins to absorb the looming supply around these levels.

It'd be prudent to raise cash and take some profits off the table while Bitcoin is below 65,000. Below there, the downside risks remain elevated for now.

From the desk of Willie Delwiche.

Key Takeaway: Risk On/Risk Off Ratio resolving higher. Commodity strength and bond weakness will have some looking for a new playbook. Breadth set up to lead.

• Paying attention to relative strength can help in two ways. It identifies leaders, to whom active investors can tilt toward, and laggards, from whom those same investors can tilt away. Up and down the size scale, Energy and Financials are leaders, while Utilities, Health Care and Consumer Staples are laggards.
•  At the industry group level, mid-cap groups are seeing improving relative strength, while large-cap groups are seeing their relative strength deteriorate.

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 October 15, 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.

Watch this video for a "behind...

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.

Intermarket Confirmation For Interest Rates

In recent weeks we have witnessed rates break above 1.40% and crude oil achieve its highest level since 2014. One of many missing pieces for the intermarket puzzle is the Copper/Gold ratio, which has been chopping sideways since risk assets peaked back in May. This week, we got an upward resolution, which suggests that base metals will continue to outperform precious metals. But it also suggests we’re entering an environment conducive to higher rates and higher prices for commodities, in general. This is a constructive pattern breakout that supports the global growth and reflation narratives.

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.

• This week, we saw continued strength from our macro universe as 83% of our list closed higher with a median return of 1.56%.
• Copper $HG was the big winner, as it gained over 10% and registered a fresh 13-week high in the process.
• The biggest loser again this week was the Volatility Index $VIX, with a loss of -13.16%
• There was a 19% rise in the percentage of assets on our list within 5% of their 52-week highs (currently at 66%)....

These are the registration details for our live conference call for Premium Members of All Star Charts.

This month’s Conference Call will be held on Tuesday October 19th at 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 Tuesday night: