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.
What a day, gains of more than 1% for the major indices across the board.
Yesterday, at around 2:45 p.m. ET, I alerted Swing Trader Pro Members in Rangefinder that I bought the $SPY at 363.80. My target was 368. We hit over 372.
The Fed unleashed a speculative bubble when it cut rates in the second half of 2019. Apple (AAPL), the largest company in the US, led the market higher during the boom and has been resilient as other areas have gone bust.
The Numbers: Both AAPL and the equal-weight S&P 500 (RSP) are down 20% this year. But while RSP has pulled back to its lowest level since early 2021, Apple is still 14% above its June low. Longer-term, RSP is now only 20% above its mid-2019 level, while AAPL still has a 200% gain over the past 3+ years.
One of JC's favorite trades when volatility is spiking and bearish sentiment seems a little overdone on the downside is to either buy stock in Berkshire Hathaway $BRK.B or even better -- sell some naked puts to fade the fear.
During our morning meeting today, JC was feeling that the time was right to pull the trigger on this idea again.
Selling naked puts is the move for us today, but we have to be aware that earnings are on the horizon in early November -- which may be accounting for some of the extra premium in November monthly expiration options.
As you can see from this chart, $BRK.B has undercut a significant level ever so slightly, but if this move is false, the whipsaw back up should be swift:
There's a lot that we can learn from Warren Buffett, who many consider to be one of the greatest investors of all time.
One of the most important lessons of all of them is that there are no called strikes on Wall Street. In other words, in liquid markets, you're not penalized for “missing” a trade.
The market doesn't guarantee traders much. But we can be certain there will always be future opportunities. We're not venture capitalists running rounds on private companies where a single deal can make or break our year.
Instead, we operate in public markets, where there will always be a multitude of setups.
In other words, we're not penalized for not swinging like we are in baseball.
With Bonds getting destroyed this year, it's put pressure on growth stocks, because of their long-duration characteristics.
As rates rise, it puts a lot of pressure on growth stocks. That's why historically the more Value oriented stocks and sectors tend to outperform when rates are rising.
When rates are falling that's when growth stocks usually thrive the most.
We all know this. The data is free.
BUT, a funny thing has happened over the last few months.
With bonds continuing to collapse and breaking those summer lows, the Nasdaq has been outperforming the S&P500.
The calls for a dollar top are growing louder as analysts claim the advance is overextended.
They’re right. But pushing further into overbought territory is exactly what parabolic rallies do. And many of the technical tools supporting the thesis that the dollar is topping do not apply.
In practice, mean reversion tools such as oversold/overbought conditions, price exceeding the upper bounds of a Bollinger Band, or the percentage gain above the moving average du jour are best used in trendless markets.
The earnings momentum trend rolled over last week. Our Macro Health Check now shows red lights (4) outnumbering green lights (2).
Why It Matters: The June stock market lows came with a macro backdrop that was challenging but stable. Stocks don’t move on good and bad, they react to better and worse. The macro environment is getting worse and holding support levels is more of a challenge.
In taking a Deeper Look we will pull back the curtains on this checklist. We also look at how these latest developments are being reflected in investor risk appetite and where new risks might be developing.
