The Nasdaq100 index just went out at the highest levels in history relative to the much broader Russell3000 Index.
Technology represents about 50% of the Nasdaq100, with Apple's weighting coming in at 11% of the index and Microsoft currently at just over 10%.
But the Nasdaq100 is a good representation of these mega-cap names, because Amazon, Google, Meta and Tesla all carry huge weightings. Remember, none of these stocks are in the Tech Index.
So the Nasdaq100 broadens it out to what most people consider "Tech".
Here's the QQQ hitting new all-time highs relative to Russell3000:
If these were the first three lines people read in a book about profitable trading, odds are many wouldn’t make it past the first page.
It’s natural for humans to want to avoid pain, to choose the easy path, and to put in the least amount of work for the maximum amount of output. Business schools call this “efficiency.”
And you can find plenty of examples in the real world where this is good, solid advice.
Trading is not one of those places.
The hard truth is that 80-90% of people who attempt trading in any capacity, frequency, or timeframe eventually end up net losers.
So why would we want to choose to do what the average trader is doing? The average trader is a loser. The stats don’t lie. Don’t make this fact worse by denying it.
Sometimes investors forget that there are 500+ stocks in the S&P500, 30 stocks in the DJ Industrial Avg and approximately 3000 stocks in the Russell3000.
This is all free and public information.
But still, investors forget, especially during times when it's most important to remember.
That's just human nature.
We take things for granted until we need them the most.
This quarter has been a prime example.
You see, while the S&P500 and other indexes were making new lows last month, the list of stocks making new lows had already peaked in early October.
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
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've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list now, a company must have a market cap between $1 and $4B.
The powerful rally in stocks shows where the "pain trade" is (higher), and now I'm on the hunt for strong, leading stocks that will continue to turn the screws on the bears.
