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.
This recent risk-off move in the equities market was textbook.
It's no coincidence the S&P 500 sold off at the channel resistance and AVWAP off the highs. We're more or less seeing a confluence of developments skew risk-off over the last few weeks.
The US Dollar Index is at a logical level to bounce, while cyclicals, which have been leaders in the equity markets, are pausing at their August highs.
Meanwhile, most crypto assets are retesting their June lows from the underside.
In Bull Markets we see more stocks making new highs.
That's just math right?
And when we talk about new highs, you'll often hear people discussing the new 52-week high list.
Until recently, this list was almost non-existent.
So while there's definitely a ton of more action there, we should really be seeing an expansion in new 1-month highs and new 3-month highs.
Crawl before you walk.
If this stock market rally has legs, more new highs is just mathematically necessary for that to occur.
It's a market of stocks.
Here's the 3-month high list on the New York Stock Exchange. An expansion in upside participation will go a long way in proving that, yes, in fact the path of least resistance is higher:
Portfolio Update: In our Cyclical portfolio we have moved global equity exposure from Latin America to Europe while in the Tactical Portfolio we are reducing energy exposure to take advantage of shifting global leadership and improving trends from the metals.
The S&P 500 continues to make lower highs as new lows have approached, but not broken below, new highs. This breadth signal occurred as the S&P 500 was peaking in January. It re-emerged near the March and August highs and appears to be doing so again.
It's hard not to notice the strength we've been seeing in the metals space lately. This surely is getting the Gold Bugs excited.
We wouldn't consider ourselves any kind of "bug," but it's fair to say we're biased toward charts that trend. If line goes up, we like to buy. If line goes down, we like to sell. Simple.
If we can get into an emerging trend early -- so much the better!
"Poor man's gold" (as JC called it), might just be starting a big relative outperformance trend that could spell a big opportunity for us.
Don't listen to people who claim to know the future.
They're all full of shit.
Technical analysis isn't a mystical prediction machine. This is nothing but a simple, repeatable, and foolproof process for managing risk.
Whenever we're looking to buy a stock, a cryptocurrency, or any other publicly traded asset, we always prioritize where we're wrong rather than how much money we could make.
If you haven't learned by now that risk management is paramount when managing money, you're beyond saving at this point.
