We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
Today we're here to discuss with you our process of Top/Down Analysis. As we go on our way, we'd like to take you along on this journey as well.
With the market sectors passing the baton of strength to one another, one sector stood out. PSU banks not only stood out in terms of the outperformance that we're witnessing but also simply because they are PSU Banks. When was the last time one was bullish PSU Banks?
Those who've had their fair share of capital loss in the past have had something to do with PSU banks. For sure.
But has the tide turned? Are we entering a bull market when it comes to this sector? Let's take a look!
What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be of any security, in any asset class, on any timeframe. Sometimes it’s an absolute price chart, other times it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So, let us know what it is… Buy, Sell, or Do Nothing?
Although the inverse correlation is not as strong with equities, it still exists. But the USD’s resilience during the second half of this year hasn’t stopped stocks from screaming higher.
While we definitely aren’t in an environment where USD weakness is a tailwind, the evidence continues to stack up in favor of the bulls and risk assets.
The dollar is just one data point. But it’s a rather important one, as the direction of King Dollar has proven to have a profound impact on other asset classes.
Today, we’re going to highlight the decoupling of USD relationships and what it could mean for the rally in risk assets.
Crypto bull markets are seriously no joke, and we wouldn't be surprised to see a lot of these names multi-bag over the coming months and quarters.
But despite how well things are looking, it's vital to remain humble and level-headed throughout it all.
The old saying that "don't confuse brains for a bull market" is particularly relevant here, and is the epitome of the laser eyes crowd. Any idiot can buy a coin that moons in a crypto supercycle, but not everyone can successfully manage risk and their emotions.
Key Takeaway: Small-caps leading the way higher. No breadth thrusts (yet) but rally participation is improving. Looking for copper & bonds to confirm risk on messages from the equity market.
Energy and Information Technology are at the top of the relative strength rankings. The industry group heat map confirms this strength with Energy and Semiconductor groups (up and down the cap scale) accounting for five of the top ten spots in the industry group rankings.
Relative weakness can be found in Utilities, Consumer Staples and Health Care, trends that are echoed in both our sector rankings and the industry group heat map.
This is one of our favorite bottom-up scans: Follow The Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients. Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: because they think the stock is about to move in their direction.
We’ve already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottom-up scan, “Under The Hood.”
We recently decided to expand our universe to include some mid-caps…
For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but we think it’s time we branch out a bit and allow some new stocks to find their way onto our list.
That's right, I'm on the couch, settled in for a nice rom-com with the wife, passing the chip dip, and thinking about the stock dip I'm about to buy.
Sometimes, this is where and when my best ideas hit me. How about you?
But in the case, it just so happens the All Star team was already one step ahead of me on today's idea as they covered it in their recent Monthly Charts Strategy Session last week. At least now I get to enter at a better price!
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Breadth Confirms New Highs
Last week we covered the modest breadth expansion in US indexes. The picture was still somewhat mixed as most AD lines had not made decisive breakouts. That all changed this week. Not only did most large-cap AD lines in the US make new highs, but small and mid-cap AD lines also resolved higher. Here’s a look at the advance-decline lines for both developed and emerging markets, which are pressing up against new highs as well. This is the kind of broad confirmation from internals that bulls want to see.
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.
