From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
The rally in some commodities has been near-vertical this year.
And we’re seeing this strength across the entire complex -- from energy contracts like crude oil to base metals such as tin and even grain markets like wheat.
While these kinds of moves are bullish over longer time frames, when things get too hot (like they have), it’s often not sustainable on a tactical basis.
This is the situation right now for a lot of commodities. We think a period of well-deserved digestion is underway for the broader asset class.
But this doesn’t mean there won’t be fresh up-legs taking place in some individual contracts.
As this new secular bull market matures, pockets of strength will rotate across the space. Our only job is to find the emerging leadership.
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.
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.
It wasn't until the last year of high school that I made the last-minute decision to study finance at university. For the longest time, I was preparing to study mathematics, astronomy, and physics.
The universal disciplines of science I learned in this period will always stick with me as an aspiring trader.
One discipline is the Feynman Technique, a foundational mental model you can use to unlock growth in your career, startup, business, writing, and life.
While the dollar pressed to new highs against the yen, the pound, and the euro, it struggled to gain ground against commodity-centric and emerging market currencies.
The lack of broad strength had us questioning the validity of the recent rally in the US Dollar Index $DXY.
That’s changed recently.
Today, the dollar index is catching to new highs against a backdrop of broadening strength, not weakness. Now that we’re seeing dollar internals flip and start to confirm these new highs from the index, this is not a trend we want to fight.
With the S&P500, Dow Jones Industrial Average, Nasdaq 100 and Global 100 Indexes down in recent weeks, the Dow Jones Transportation Average has been up each of the past 2 weeks.
And Transports started out this week positive once again:
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 and make them a pretty penny.
We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 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 the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
The way we did this is simple…
To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Equities continue to get hit. And yesterday, commodity-related stocks were not immune to the selling pressure.
Energy, metals, and natural resources, in general, all sold off into the close. The inflation, interest rate, and commodity trade had a really rough week.
It's never a good thing when the leaders get hit like this. At the same time, two days really doesn’t make a trend.
Before we get sucked into calling peak inflation, let’s zoom out and put all this near-term volatility into the right context.
When we do, it reconnects our eye with the underlying trend – which is unequivocally higher. It also becomes clear that many of these stocks are finding resistance at logical levels – areas where we would expect these stocks to digest gains.
And that’s exactly what they’re doing!
Let's take a look!
First up is a triple pane chart of the Metals & Mining ETF $XME, Copper Miners ETF $COPX, and the Steel ETF $SLX:
This chart gives a great read on how base and industrial metal stocks are doing.
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
