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.
The Indian Rupee has been strengthening against its counterparts and that has been an interesting change in trend from what we were seeing in early February.
With that in mind. let's take a look at some important levels to track as this trend continues to play out.
March in Wisconsin (especially here in Milwaukee close to Lake Michigan) is a season of it being already and also not yet Spring. Depending on whether the wind is blowing out of the warm Southwest or coming at us right off of the lake, temperatures can swing dramatically. But the consistent warmth of the Sun heats the Earth and gets the soil ready for planting.
It’s one of the most exciting times of the year for me, full of promise & expectation. I’ve already been at work in the garden (the areas, that is, that are already receiving enough sunlight to soften the dirt). One of several changes in my life over the past year was last Fall’s rebuilding & re-arranging of the raised beds in our backyard. I’m excited by the new layout but it means more work getting them ready for planting. The beds are pretty barren at this point. Rhubarb and horseradish will soon provide some evidence of life, and I tried to work around the asparagus, so hopefully that survived. Garlic, unfortunately, did not get planted.
Markets across the globe have been taking a breather as the momentum cools off. Taking a closer look back home, the indices have been largely choppy and have consolidated over the past two months.
Is this merely a consolidation? Or are we looking at a minor correction ahead? Let's take a look at what the charts have to say.
In our Three Charts for the Week post, we talked about the resistance Nifty had been facing at 15,400 and also highlighted the crucial support at 14,460. We noticed a divergence in Nifty in January and that has continued to play out as the rally progressed. Within the current setup, the price hasn't been able to move past the 15,400 mark, in addition to now challenging the support level of 14,460.
Despite stress points, growth heading in a favorable direction
Apparently, there is a ship stuck in the Suez canal. Pictures show the “Ever Given” container ship turned sideways in the narrow waterway, with its bow wedged on one bank and its stern close to the other bank. This ship, according to the Wall Street Journal, is one of the largest in the world. It’s 400 meters long (longer than the Empire State Building is tall) and can normally move 20,000 containers. In the current situation not only is it not moving its 20,000 containers but has ground to a halt all traffic in both directions in one of the world’s busiest waterways. On average, 55,000 containers travel through the canal on a daily basis, in addition to numerous ships carrying oil and liquified natural gas. The goods are there, but they are not moving.
