The January Effect posits that financial markets experience a seasonal anomaly in the beginning of each year whereby stock prices tend to rise more than in any other month.
But this bullish period extends beyond a single month. In fact, our data show that buyers come out in full force starting in the late fall/early winter.
According to historic seasonal trends, the best time of the year for the stock market is from November to January. Smaller stocks are known to outperform during this period.
And if we’re focusing on small-caps, November is by far the single best month. So it should come as no surprise that the Russell 2000 and S&P Mid-Cap 400 are breaking out to fresh all-time highs this week. They did the same thing last November. In fact, November of 2020 was the best month ever for these small- and mid-cap indexes.
Let’s dive in and discuss some of the seasonal tailwinds supporting these new highs from SMIDs.
Ok, so technically Microstrategy $MSTR is not a bitcoin ETF.
But for those of you paying attention to this space, you know that the CEO Michael Saylor has gotten very long and very loud about his company investing significant portions of its operating capital in Bitcoin. And because of this, the share price of $MSTR stock has since become highly correlated to the price action of Bitcoin.
We were chatting about it this morning and the one thing the team all agreed on is 10 years from now, Saylor is either going to go down as the Greatest Fool in History, or, The Greatest Investing Genius in History. There's really no other outcomes here for him. And you know what? I say cheers to you, Michael Saylor! Way to put your cohones on the line for something you so passionately believe in. Your investors will either one day elevate you to Sainthood or sue you into oblivion. Godspeed.
We've got our popcorn ready and we'll be watching!
Anyway, all of the above makes for fun coffee table conversation. But we traders only care about the price action and how we can profit from it. So let's get right to it.
The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.
The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.
We held our November Monthly Strategy Session last night. Premium Members can access and rewatch it here.
Non-members can get a quick recap of the call simply by reading this post each month.
By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.
Let’s dive in and discuss three of the most important charts and/or themes from this month’s call.
We’ve made some changes to our ASC+Plus Dynamic Portfolios.
With the weight of the evidence turning more bullish, we have increased our equity exposure in the cyclical and tactical opportunity portfolios.
Within these portfolios we have also moved away from equity areas that are struggling to participate in the rally and re-focused exposure on areas that are experiencing upside momentum.
Energy futures are resolving higher from multi-year bases. Stocks are pressing to new highs all along the cap scale. And the more cyclical, value-oriented markets are catching a bid and becoming leadership groups again -- think financials and energy.
It appears everything is falling into place. But a few pieces are still missing…
For instance, you might assume the US dollar is under pressure as commodities and stocks outperform.
But it’s not.
In fact, the dollar made new 52-week highs not long ago and has since consolidated at the top of its range while riskier areas of the currency market have struggled to catch a bid.
We’ve highlighted the US Dollar Index and the mixed signals coming from developed currencies in recent posts.
The buzzword over the last few days has been the "Metaverse", but what is it, and why should we care?
Breaking all the headlines last week was the big tech news that Facebook was changing its name to Meta, realigning it with its future goals and ambitions. The metaverse is seen as the next iteration of the internet through virtual reality, primarily as a new way of experiencing the world of social media.
Following all this talk, virtual reality and gaming cryptocurrency protocols have caught a nice bid, with Decentraland and Sandbox up over +320% and +250%, respectively, since the Facebook Connect event.
And just take a look at the explosion in google searches about the metaverse:
Monthly Charts are very important to us. As a team, we regroup several times, but monthly charts put us on the same page, without having to discuss it.
Process is an important aspect of any activity. And so, Monthly Charts analysis is an important aspect of our research. Without this, it is easy to get swayed in the short-term moves and get carried away by them.
You can sign up for our Monthly Strategy Call and get the whole update of the market. We're here to provide a glimpse of what's going on.
