February is one of the worst months of the year to own stocks.
Is that why we've been seeing all this rotation into defensive sectors?
Think about it, we haven't seen any rotation at all into Consumer Staples this entire bull market.
Until now.
And if you go back and study the history of bag holders, you'll notice that they love buying stocks when Consumer Staples finally start to become leaders.
This is classic rotation you see quite often ahead of a tough time for the market:
The FOMC stuck to its script this week, kicking the can and keeping rates steady.
Everyone was expecting the news. But the market wasn’t expecting Fed Chairman Jerome Powell (the man, the myth, the legend) to completely dash its hopes of a March cut.
Strangely enough, rates continue to fall on the news – even as markets adjust to the possibility of the initial rate cut now coming in May.
Before you run out to buy US treasury bonds, check out the overlay chart of the US 2- and 30-year yields:
There’s a big difference.
The 2-year yield is churning sideways, reflecting the market’s expectations of the FOMC’s next move – nothing in the foreseeable future.
We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.
However, when it comes to our latest project, it couldn't be any simpler!
With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.
Welcome to The Junior Hall of Famers.
This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.
There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if price is rising. That's good enough for us.
From the Desk of Steve Strazza and Alfonso Depablos
The largest insider buy on today’s list comes in a series of Form 4 filings by Gilead Sciences.
The American biopharmaceutical company revealed a purchase of roughly $320 million in Arcus Biosciences Inc $RCUS, increasing its ownership stake to 40%.
Let me remind everyone what a bad idea it is to sell naked calls.
We don't do it.
I often want to do it.
Many times, it makes sense to do it.
But the answer is always no.
It's just not worth it.
Go ask around. The old timers will tell you.
"Don't do it kid"
But that doesn't mean that as a philosophy, we shouldn't approach the market with that sort of "naked call selling" mentality, at least for the foreseeable future.
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.
So Santa was a no-show this season. The Nasdaq 100, the S&P 500, and Papa Dow are still managing to post positive monthly returns heading into January’s close.
That's an auspicious data point for the rest of the year.
Beneath the surface, last quarter’s laggards are also playing catch up to the leadership groups…
This is a bonus, second trade idea for today that came out of our internal conference call this morning and dovetails nicely with this note that JC just published.
We're getting short Lululemon, $LULU due to what appears to be a failed breakout:
