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We've had a couple picks from our recent Young Aristocrats report that I've liked for options plays. But I waited on this one until today because we needed to get earnings out of the way.
The good news is, the post-earnings report reaction was muted and the setup remains intact, so we're ready to take action.
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.
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...
Many of the names we've been taking shots on the long side have fallen back below their risk level, to then aimlessly meander. Neither breakouts nor breakdowns are following through. It's ultimate indecision at play...
This is such a prevailing theme right now in the near term that even though we've been hitting on it a lot recently, we want to be downright obnoxious about it.
Until Bitcoin can pick a direction, buying any Altcoins on the long or short side becomes infinitely more complex.
Just take a look at how few outliers there have been from this mess recently. More or less every coin (above $1B in market-cap), is being heavily anchored down by this messy action in the major coins:
This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.
As we progress into Q2 of Fiscal Year 2021-2022, this playbook outlines our thoughts on every asset class and our plan to profit.
This playbook will cover our macro view, touching on Equities, Commodities, Currencies, and Rates, as well as outline our views on the major nifty indices and the sector/thematic indices.
We also cover individual stocks we want to be buying to take advantage of the themes discussed in the playbook.
It isn't often that we put on trades where we are explicitly swinging for the fences. But an opportunity has presented itself in the lastest Young Aristocrats report that is offering up an all-or-nothing reward to risk scenario. If we're wrong, we'll likely lose 100% of our capital. But if we're right? We could potentially make 6-10x our investment. I'd like to think the All Star Chart team's conviction on this trade tilts the odds in our favor a little bit.
What's interesting (at least to me), is that the play is in a name with exposure to water. Yes, water. The earth's most abundant, yet precious resource. I've always daydreamed of someday making a killing with long-term investments in water rights and so forth. I'm not there yet, but maybe this play will jump-start my exploration.
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.
Key takeaway: It’s bears on strike and bulls on parade. While it persists, it can fuel a rally. Whether it can persist is another question. We have already seen (particularly in less robust trading activity and a downward trend in the NAAIM exposure index) evidence of waning risk appetites. Earnings season may test investor resolve. Expectations are in the sky in terms of both results for the past year and estimates for the year ahead. If the earnings rebound is seen as slowing, investors may struggle to maintain an optimistic outlook for stocks, especially with valuations suggesting that they are priced for perfection at current levels.
Sentiment Report Chart of the Week: Earnings are expected to soar
Q2 earnings season is heating up and the results are expected to be outstanding. Not only are earnings overall expected to have risen more than 60% from year-ago levels, but they are expected to continue to...