Welcome back to our latest Under the Hood column, where we'll cover all the action for the week ended February 4, 2022. This report is published bi-weekly and rotated with our Minor Leaguers column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names.
There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks seeing an unusual increase in investor interest.
But also notice how we've been seeing more strength around the world, with the US acting as one of the laggards. It probably has something to do with all that growth exposure in a lot of US large-cap indexes.
Most other countries don't have that.
Here you can see the Dow Jones Composite Index holding that key 11,200 area. This is a good representation of what we're seeing in a lot of other major indexes and sectors:
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Rates Spike Around The Globe
Interest rates are on the rise, and it’s not just in the US and Europe. The Japanese 10-year yield hit its highest level in over five years last week. Like Germany, Japan is now back in positive territory after a half-decade of offering negative yields. All of this action is supportive of the new highs we’re seeing from the US 10-year yield. With rates on the rise around the world and the question turning into “how high” – as opposed to “if” – the FED will hike, it’s time to look for opportunities in the areas of the market that benefit the most from a rising rate environment.
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
I love when the team feels a little "frisky" and hunts for "speculative" ideas. There's nothing that gets the creative juices flowing more than getting outside the wheelhouse a bit, looking for new experiences.
This lead them down the path of picking through the wreckage in Chinese stocks.
In the recent Monthly Candles Strategy session (find the charts here), JC highlighted a couple names in China that are offering speculative opportunities for those willing to step boldly where most bulls are too sheepish to look.
As options traders, we too can join the party. But we can minimize the risk better while still participating if the speculators have their way.
In last week's report, we outlined a handful of bullish developments appearing as we waited for price action to respond.
We discussed the fact that the institutional money that left in October is flowing back, exchanges are seeing modest outflows, and traditional markets are looking prime for a tactical bounce.
Since then, we've seen Bitcoin rally to our inflection point between 41,000 and 42,000.
With momentum turning back in the favor of the bulls, the highest-likelihood scenario looks to be a few weeks of sideways price action ahead of further upside follow-through.
This week I had a great conversation with Jeremy Schwartz on the Behind The Markets Podcast on SiriusXM Radio.
Jeremy and I have been through a few cycles throughout our careers and probably understand the weightings of Indexes and ETFs better than most investors. Which was a big point I was trying to make: Understand what you own. You need to know what's inside of these things, and more importantly, what's not.
There's a lot going on in today's market but I tried to really focus in on the primary trends and where I think we're going this year.
Last time we did this I got to go down to the studio at the Wharton School at the University of Pennsylvania. But the weather was bad so we recorded remotely. Hopefully I can make it down there soon and we can do it live from the University once again.
Either way, I think we hit on a bunch of key points on this episode.
For most of my career, I've listened to fundamental analysts make the argument that investors should be overweight international stocks because they're "cheaper" than US stocks.
This has been the case for a long time now, and it's merely a function of the fact that there are far more value and cyclical stocks overseas.
But, since value stocks have been out of favor for so long, ex-US stocks have severely underperformed domestic markets.
Growth has been the place to be for the last decade, and for this reason the alpha has been with the tech-heavy US stock market over its global peers.
But now that we're seeing the tide shift in favor of value, we're also seeing early signs of reversals in the US versus the world relative trends.
There's still more work to be done before we have conviction that we want to favor international stocks, but the weight of the evidence continues to move in that direction.
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs. We’ve also sprinkled in some of the largest ADRs from countries that did not make the market-cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
