"We should be doing more in China." ~ JC Parets during this morning's internal Analyst meeting.

This, coupled with my feeling that we need to be more aggressive in the stock market right now as the potential profits on the upside could be quite meaningful, playing in China is as aggressive as it gets.

From the Desk of Steve Strazza @Sstrazza

Welcome to The 2 to 100 Club.

In this scan, we look to identify 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 list at some point during their journey to becoming the market behemoths they are today.

When you look at the stocks in our table, you'll notice we're only focused on Technology and Growth industry groups such as Software, Semiconductors, Online...

In today’s Daily Digest, we’ll review the following:

1. No new positions today.
2. Rolled GDX position to November options.
3. No positions were exited since the last report.
4. Current status of open campaigns.
5. Volatility Snapshot.

Let’s dig in!

Here is the schedule for the ASC Mastermind course: 

Week 1 (Sept. 25): Defining Personal Objectives For Trading & Investing

Week 2 (Oct. 2): Why Momentum Trading Works

Week 3 (Oct. 9): How To Do Intermarket Analysis

Week 4 (Oct. 16): Using Relative Strength

Week 5 (Oct. 30): Sentiment & Seasonality

Week 6 (Nov. 6): Pattern Recognition

Week 7 (Nov. 13): Incorporating Moving Averages Into Your Analysis

Week 8 (Nov. 20): How To Really Make Money With Dividend Stocks

Week 9 (Nov. 27): Finding The Best Small-Cap Stocks

Week 10 (Dec. 4): Profiting Off Of Short Squeezes

Week 11 (Dec. 11): When Is It Too Late To Buy Mega-Caps?

Week 12 (Dec. 18): How To Find The Next $100 Billion Company

These last six months in the crypto market have reflected the utility of patience in trading. Because we view trading through a financial lens, we always assume that risk management is preventing financial loses. And as such, we integrate strategies to mitigate against such losses.

These include stop losses, invalidations, and hedging strategies.

And while these are imperative in preventing losses from spiraling out of control, there is another aspect that gets commonly overlooked.

And that is psychological risk management.

Just like our portfolio value, we need to maintain a healthy balance within our inner emotional and psychological wellbeing. When we have a prolonged stretch of losing money in the markets, it negatively weighs on our mind. As such, this can create a negative feedback loop whereby we make decisions without awareness of the emotions in behind them.

A common misconception in investing psychology is that we should block off emotions entirely. By running a trading system, it is said that this eliminates bias and emotion from the picture, allowing us to make objective decisions informed by data. However, what this approach fails to...

A few years back, Robinhood made a big splash in the retail trading world by offering Commission-Free options trading.

Retail traders and the media that served them rejoiced! 

"This is a game-changer!" they shouted.

And in some ways it was. But not in the way you might think.

It changed the game for retail options brokers to be able to attract multitudes more sheep to get shorn. How?

For one thing, retail brokers are able to command top dollar from market-making firms who pay the brokers for the opportunity to take the other side of retail trades. This is called Payment for Order Flow (PFOF).

From Robinhood's August 7, 2024 earnings report:

In the first half of 2024, Robinhood earned substantial revenue from payment for order flow (PFOF), particularly from options trading.

In Q1 2024, options trading contributed $154 million to Robinhood’s transaction-based revenue, a 16% increase compared to the same period in 2023. This represented a significant portion of...

The dollar is weaker than you think. 

This is a major development in the forex market. And when we look under the hood, things are even worse than they appear for the greenback.

With more and more global currencies showing relative strength each day, it’s time to take a look at US dollar internals and see what’s moving. 

Relative strength is not just the cheat code for stocks, it also works for the currency market and everything else in between. 

We also learn a lot about the breadth of a given market through analyzing internals. This helps us determine how we want to position ourselves to make money. 

And right now, it looks like we should position ourselves for a lower dollar over longer time frames. 

The following table shows the US dollar is in, or moving toward, a bearish trend regime against most other major currencies.

As you can see, over 60% of currencies are in uptrends against the dollar… and this is now true on every timeframe we analyze. 

This is...

They can't even sell the Chinese stocks!

Chinese stocks!

The worst stocks on the planet. Yes those. They're even buying those.

That's what happens in bull markets. 

The CSI 300 is up over 4% overnight. This is the Chinese equivalent to the S&P500, which is now bouncing off support from Q1 and potentially putting in a historic double bottom:

Think about what this could mean to global markets, if even the worst stocks can't go down.

I mean, just look at the returns in China compared to the United States over the past 4 years, taking it back to before the prior cycle's peak.

Using this timeframe, you can really see the lack of recovery in China.

And I'm not just cherry picking the CSI 300 here.

It's just that this index is a good representation of the Chinese Market.

But if you want to compare that to the more popular China ETFs, you'll see the same thing, or worse.

While the CSI300 and China Large-cap 25 Index $FXI are only down 26% for this period, the China Technology ETF $CQQQ is down double that. So is Chinese Internet ETF $KWEB.

I...

Gold futures have been relentlessly rising and printing new all-time highs. The precious metal is now overbought on a 14-day, week, and month RSI. 

We've recently seen Palladium rip over 20% in a few days and momentum thrusts for the Junior Gold & Silver Miners ETFs.

With this new Gold bull market now almost 7 months old, maybe it's time for Silver futures to break out of their multi-year range.

Let's talk about it:

From the Desk of Steve Strazza @Sstrazza

Welcome to The Minor Leaguers.

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.

Nowadays, to make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.

And it doesn't have to be a Russell component — it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe.

The same price and liquidity filters are applied. Then, as always, we sort by proximity to new highs in order to focus...

No need to get cute, and no need for an elaborate explanation of what's going on.

Quite simply, we're in a bull market. And it would be irresponsible to think that technology and high beta names won't be playing catchup soon.

We could try to pick the individual winners, or we can just buy a basket. Today's trade is that.

Here's a current one-year chart of ARK Innovation ETF $ARKK:

In the video above, me and Steve Strazza discuss that we want to be owners of the March 55 calls for a breakout move that kickstarts a recapture of all the lost mojo here in ARK over the past couple of years. It's crazy that this ETF once traded as high as $159.

Today's trade is not a bet that we'll be back there any time soon. But we think the battleship is turning and we'd like to catch the first wave.

Here's the Play:

I like buying a $ARKK Nov/Mar Diagonal Call Spread. We're going to short the November 53 calls and simultaneously purchase the March 55 calls for an approximately $1.25 net debit, which represents the most we can lose in this trade (as currently constructed).

The March 55 calls are the position I...

In today’s Daily Digest, we’ll review the following:

1. No new positions today.
2. Rolled XLI position to November options.
3. Exited IWM (profit), XRT (profit), and XLK (loss).
4. Current status of open campaigns.
5. Volatility Snapshot.

Let’s dig in!