From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
The market is giving us absolutely no reason to play defense right now.
Regardless of the asset class, it's the risk-takers that are having their way in this environment.
Investors stretching out along the risk spectrum is a point we've been hammering home for some time now, particularly in our weekly RPP Reports - like this one.
Not only is this true on absolute terms, but we're also witnessing cross-asset relationships progress higher and in favor of risk-asset which can only be taken as a positive.
It's not often we see all asset classes in agreement with each other, but when we do, it's a significant driving force that supports the risk-on trade and suggests higher prices to come.
Our most recent Under The Hood report was packed with a handful of buying opportunities. As usual, these names are all exhibiting bullish relative strength and offering investors well-defined risk levels to trade against... and of course, reward profiles skewed heavily in our favor.
In an environment like this one... where areas far and wide are making new highs, and even the weakest corners of the market are participating, there is no shortageof strong stocks floating to the top of our bottoms-up scans.
In recent months, this column (as well as the Minor Leaguers) has been dominated by smaller-cap names as SMIDs and Micro-Caps have been where all the buzz is among investors these days due to their aggressive outperformance.
This week Howard and I talk about the short squeezes happening in this market. We've seen it in GameStop $GME, Blackberry $BB and AMC Theatres $AMC. Are more of them coming? Why should investors care?
How about the Speaker of the House of Representatives Nancy Pelosi trading Tesla Call Options. Should we complain about her trading habits, or do we use that as information? In other words, what does she know that the rest of us don't, that drove her to invest in so many options contracts?
Are you on Clubhouse? Is this the new Social Media App that everyone will be on? For questions like these, I always turn to Howard Lindzon.
We cover all that and so much more in the latest episode of Happy Hour w/ Traders:
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.
Things are getting crazy out there. But this post isn't going to be about all the deadwood companies whose stocks are getting short squeezed. I'm looking at some of the biggest names showing signs of breaking out and this is something investors should not ignore. We got into Google (Alphabet) recently, and this might be a double-down of sorts, but now we're eyeing another mega cap.
We updated our Breadth chartbook a few days ago which Premium Members can check out here.
There are literally hundreds of charts with various breadth indicators from new high/low and overbought/oversold percentages to A/D lines, and more for not only the major averages and indexes but also each Large-Cap Sector SPDR.
What's this month's takeaway after spending a morning digging through our expanded workbook (that's right, there's more)?
Market internals continue to be a tailwind for stocks as we saw an improvement in the vast majority of our metrics again this month.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
We continue to experience a bullish expansion in participation from stock markets around the world.
Just a few days ago we discussed buying Israeli stocks and explained how their strength at the index level was being driven by their heavy exposure to Technology.
Mega-Cap Growth and Tech stocks (we're including Communications and Discretionary here -- "Tech but not Tech" names such as Alibaba, Tencent, Meituan, JD.Com, etc.) are also a dominant market force in China.
We wrote about this exact topic in November, and how strength from these names would likely continue to propel these Large-Cap Chinese Indexes and ETFs higher. The Chinese Tech ETF $CQQQ and iShares Large-Cap China ETF $FXI tacked on an additional 24% and 12%, respectively in the time since.
This week on the podcast, Jonathan Krinsky joins me for a chat about Sector Rotation. While the Mega-cap names like Apple, Google, Facebook, Amazon and Microsoft grinded sideways, or even down, since August, the Small-caps, Mid-caps and Micro-cap names have been the leaders. What happens if the Mega-caps break out of these bases to new all-time highs? Does the sector rotation continue? Or do we then rotate into the more defensive areas like Staples, Utilities and REITs, which currently keep making new relative lows?
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Monday February 1st @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Last week's Mystery Chart was the Israeli Tel Aviv 125 Index zoomed all the way back to the start of this century.
You might be wondering why we're discussing Israeli equities of all things...
The short answer: They're making new all-time highs.
In this post, we explore the sector that is mainly responsible for these gains, dive into its strongest components, and outline some long ideas with risk/reward setups skewed in our favor.
Not only is this yet another group of stocks we can use to express our bullish thesis on risk assets -- it is also excellent information. Once again, we're seeing another development pointing to the increasing participation and improving breadth across international equity markets.
This move in Israeli equities also fits into a larger theme that is taking place beneath the surface for stocks all around the world. It's difficult to overstate the significance of these moves.
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 in order to profit in the weeks and months ahead.
As we discussed in last week's report, bears have a lot of work cut out for them.
With all this rotation into offensive groups and cyclical areas of the market, they are really running out of talking points. We literally can't find a meaningful group of stocks in the US or even abroad that we would want to short at this point.
This is excellent information as it's not something we can say very often... and it's bullish, just to be clear.
I'm getting trolled more than I have in a long time. It's almost like people are mad at me for being as bullish of equities as we've been, and continue to be...
What's everyone so angry about? I don't understand.
Anyway, yes there are stocks we want to buy. Can some stocks go down? Sure. Does that change the fact that there are stocks we want to buy or own? No.
As far as potential headwinds for stocks go, I've got 3 pretty simple ones today.
