From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
As we discussed in our latest report, bears are running out of any substantial fuel to support their position.
And despite the arrival of some long-awaited selling pressure last week, that absolutely remains the case.
Call me a young naïve trader drunk on a bull market, but I don't think it's necessary in today's world to blow up in order to learn.
Hear me out.
Back in the '90s and early 2000s, you read a book and experimented with your account through trial and error. But today, we have widespread democratization of financial information that just wasn't around back then.
Given that this new generation of traders have endless routes of online resources and a completely transformed avenue of education, I don't think there's any real need for that.
Those who've been cynical on this trend have been dead wrong.
Retail has been the big winner.
The hedge funds got Tesla wrong. When TSLA didn't meet their standardized Wall Street mold, they didn't give a second look and proceeded to miss one of the best trades of the last few years.
And what about Bitcoin? It was retail that got to the party early on that one, too. For a symbolic change, you had the institutions chasing retail, not the other way around.
I only began trading, charting, and researching just a few short years ago - so it's only natural I become victim to some rookie mistakes.
Seeing my trading account up by a decent margin has given me this attitude that I'm some wonder kid, and that I've somehow cracked the puzzle only being a teenager.
But this couldn't be further from the truth.
If this rally has got you thinking you're a superstar, consider that 87%, a near-record high, of the Russell 3000 have outperformed the broader market in the last 3 months. That's right, 87%.
Assuming you've held stocks over this period, statistically speaking, it has actually been more difficult to underperform the S&P 500 than it has been to outperform.
Now that the official period of the Santa Claus rally is over, we can look back and see if Santa actually showed up or not.
As we discussed last month before it got started, the Santa Claus rally lasts for 7 trading days: the last 5 of 2020 and the first 2 of 2021. Based on the way the calendar worked out, this year's festivities began on December 24th and lasted through yesterday, January 5th.
The S&P500 rallied about 1% during this period, which is perfectly normal market behavior for this time of year:
I hope you all had a great Christmas and enjoyed your New Year's celebrations.
It's around this time of the year everyone gets all excited to ramp up their New Year's Resolutions: start exercising more, lose some weight, drink less...
But if there's one resolution I'd like to see more of from technical analysts, it's to keep your charts clean!
In a further effort to identify individual equities that fit within our larger more Macro thesis, we couldn't be happier to roll out and share our latest bottoms-up scan: "The Minor Leaguers."
We'll also be writing a post every other week where we outline some of our favorite setups from the watchlist. This is the first edition.
Moving forward, we'll be rotating this column with "Under The Hood" each week.
In order to make it onto our Minor League list you must have a market cap between $1 and $2B. There are also price and liquidity filters.
Then, we simply sort the stocks by their percentage from new highs. Easy.
It's one thing stacking up all the topics you need to learn for the test, but it's another to take on lasting knowledge that'll carry you for the years ahead.
Shooting through the textbooks and lectures reinforced that despite all the charts I go through, the process I use represents only a very small proportion of the way people interpret technical data. Seriously, there were dozens of indicators, ways to plot price, and even basic assumptions on why we do technical analysis that I had never come across.
This was all so great to learn.
While I might not use these tools on a day-to-day basis, understanding how people look at markets differently and expanding my knowledge and skills can only be a strength.
It's always hard for us market nerds to level with others who don't share our obsession for Finance.
And that's important because, with all the noise of today, I think there's a very real barrier to finding sound information. While I'm by no means an authority on this subject (in fact quite the opposite), whenever I talk to people about Finance, I always hear two complaints.
From the desk of Steve Strazza @Sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
Last week, we mentioned we were no longer in a split market, but rather in an environment supported by strong internals and an aggressive appetite for risk assets.
This week, we're preaching much of the same.
We continue to see rotation down the market-cap scale, into Micro-Caps and SMIDS, confirming the strong underlying market internals.
As November gets under way, it’s time to review positions with November options that remain open (haven’t already hit profit targets or been stopped out).
Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.
This month, we have four open positions with November options remaining on the books. All the rest have already hit their profit targets or stop loss levels. In the scoreboard below I denote the date we exited each position.
