Key Takeaway: Even with bottlenecks & distortions, economic recovery & cyclical rally remain intact. Tactical risks have risen as the market digests gains of last year. Watch bond yields & global participation for evidence that the rally is ready to resume.
The latest 2-to-100 Club Report is out with a handful of actionable names to participate in.
These aren't trades where we expect a face-ripping rally to imminently commence. But we do think there are underlying trends that can propel these names higher over the next 3-6 months.
With that in mind, I've got a trade in November options on deck to play one of my favorites from this report.
This week we're looking at a long setup in the Chemical sector. Certain stocks from this sector are grabbing our attention and we're looking at one of those!
We retired our "Five Bull Market Barometers" in mid-July to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
Don't miss this weeks Momentum Report; our weekly summation of all the major indexes at a Macro, International, Sector and Industry Group level. As a reminder, we analyze this shorter-term data within the context of the structural trends at play.
Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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.
The rally in the stock market over the past year has been buoyed by many things and its shows. The year-over-year change in the S&P 500 reached its highest level ever this week as the index moved past the anniversary of its COVID lows. One of the sources of support in recent months has been economic data that have been consistently better than expected. Stocks have tended to do well when economic data surprises to the upside and they tend to struggle when the surprises have been to the downside. While the Economic Surprise Index is still positive, it has come under pressure in March. First, expectations for the recovery are being revised higher, but more immediately, there were a number of data misses in recent weeks. For example, housing market activity for February was weaker than expected (we touched on this in this week’s Perspectives piece). Economic optimism is generally welcome and tends to be self-fulfilling, but if expectations move too far ahead of reality, stocks can find themselves on a rocky path.
The recent pullbacks we've seen in a number of momentum names is offering us some advantageous opportunities to buy into some stocks we like at better prices.
One stock in particular is making a beautiful sound as it attracts my attention.
