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

It’s no secret. 

As investors, we've been rewarded for buying stocks and commodities over bonds for more than a year now. And this will most likely remain the case, as more evidence suggests we’re in an environment that favors risk assets.

The copper/gold ratio hitting new seven-year highs, AUD/JPY testing its year-to-date highs, and cyclical stocks assuming leadership all point to an increasingly risk-on tone.

But for some of us, it’s not as simple as selling bonds and walking away. In some scenarios, we must have exposure to the bond market.

If that’s the case, we want to focus on the riskier areas of the market, just like we’re doing with other asset classes.

Let’s look at a few charts that direct our attention to the strongest areas of the bond market.

First, we have a chart of Inflation-Protected Securities...

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

Most risk assets peaked during Q1 or May of this year and have consolidated in sideways ranges ever since.

But the bulls have started to take control of many of these trends. We're seeing more and more upside resolutions -- and this phenomenon isn't limited to Crude Oil, Rates, AUD/JPY, and cyclical stocks. Similar patterns are also playing out when we look at intermarket ratios, particularly those we use to measure risk appetite.

In today’s post, we'll dive into one of our favorite risk-appetite relationships and check for price confirmation in a variety of ratios.

First up is none other than large-cap consumer discretionary versus consumer staples stocks: 

JC already wrote about the breakout in XLY/XLP this week, which you can read here.

The bottom line is this breakout is bullish for the broader market. Stocks are likely moving higher across the...

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

Interest rates, inflation expectations, and commodities are all on the rise. 

But as these pieces of the intermarket puzzle fall into place, it’s hard to make sense of the strength in the US Dollar Index $DXY. That’s also been on the rise recently.

Even other areas of the currency market don’t quite fit with the action we see in the USD. We pointed out the absence of risk-off behavior in a post last week where we highlighted the broad weakness in the yen as well as AUD/JPY making new multi-month highs.

So what’s going on with the US Dollar Index?

Let’s look under the hood at some individual USD pairs and their trends across multiple timeframes to see what the weight of the evidence is currently suggesting.

First, let’s look at the short-, intermediate-, and long-term trends in some of the main US dollar crosses:

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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?

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%)....

From the desk of Steve Strazza @Sstrazza

Our International Hall Of Famers list is composed of the 50 largest US-listed international stocks, or ADRs.

These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.

It’s got all the big names and more -- but only those that are based outside the US. You can find all the big US names on our original Hall Of Famers list.

The beauty of these scans is really in their simplicity.

We take the 50 largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.

Let’s dive in and take a look at what some of the largest stocks around the world are doing.

Here’s this week’s list:

And here’s how we arrived at it...

• We filtered out any names that...

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

Copper was a critical piece missing from the intermarket puzzle heading into the fourth quarter.

Just last week, copper was testing year-to-date lows and looking vulnerable for a downside break. Meanwhile, energy futures and interest rates were rising, and cyclical and value stocks were getting back in gear.

The mixed signals were impossible to ignore. It’s not likely that the recent breakouts in crude oil and the US 10-year yield would hold in an environment where copper is breaking down.

Dr. Copper is a great leading economic indicator and critical to the global growth narrative. Let’s see what it’s saying.

Here are two ways we were looking at the copper chart:

We were wondering whether this was a major head-and-shoulders top or just a continuation pattern that would...

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...

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

We’re beginning to see signs that risk-on behavior is re-entering the market.

Commodities are ripping in the face of a rising dollar.

Cyclical stocks are back in gear as the S&P 500 High Beta ETF $SPHB posts higher highs and higher lows relative to its low-volatility alternative $SPLV.

Meanwhile, classic risk-appetite barometer AUD/JPY sliced through a critical level of former support-turned-resistance earlier this week.

All of these point to an increasing risk-on environment. 

But what does the bond market have to say about investor positioning toward risk?

Let’s look at a couple credit spreads that speak to investors’ willingness to incur risk.

First, we have the Investment Grade Corporate Bond ETF $LQD relative to the US Treasury Bond ETF $IEF:

Investment-grade...