When assets are in strong uptrends, they tend to not just do well on an absolute basis, but they also outperform their alternatives. In the case of stocks, some good alternatives would be Bonds and Gold. No, not bitcoin.
So with stocks all over the world breaking out to new highs, more and more stocks participating, and even the biggest laggards around the world catching a bid, how are they performing relative to their alternatives?
Well, here is Gold vs the Nasdaq Composite breaking down to new 19-year lows. The trend is strong in this one:
I took a few days off over the holidays. I couldn't tell you the last time I went that long without a chart or a tweet. It felt good.
But you know what felt even better? Getting back to those charts and digging in on what's been going on around the world. It's not work for me. I mean it is, technically. But as you probably already figured out, this is something I really enjoy doing.
So what stood out the most upon my return?
I think it's got to be the victory laps from the bitcoiners on tilt. They're acting like they've never gotten a trade right in their lives. And that's dangerous.
Sure, we're happy bitcoin is doing well. It's already up 35-40% since our latest entry point a few weeks ago. That's great. And remember, this is after it doubled immediately after our last buy point this summer.
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.
The major indexes continue to hold important levels and many large-cap sectors have laid the foundation for upside resolutions and another leg higher in their relative leadership.
SMIDs and Micro-Caps have had every chance to digest their recent gains, but we're yet to see that play out. Seeing such strong upward momentum from these stocks speaks to the healthy risk appetite we continue to point out.
Welcome to our “Under The Hood” column for the week ending December 25, 2020.
What we do is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
Whether we’re measuring increasing interest based on large institutional purchases, unusual options activity, or simply our proprietary lists of trending tickers… there is a lot of overlap.
The bottom line is there are a million ways to skin this cat. Relying on our entire arsenal of data makes us confident that we’re producing the best list each week and gives us more optionality in terms of finding the most favorable trade setups for our clients.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
New Mystery Chart!
For those new to this exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
I've heard some version of this every single day since the Spring.
These are the types of questions that come my way during bull markets. I don't get them when stocks are in downtrends, that's for sure. Different types of questions come in those environments (How low can we go? Aren't we due for a bounce? etc)
It's a new year right? The holidays are over. Make your donations, help whichever causes are most important to you, and now dedicate a little bit of selfish time to improve your own life.
Social Media can be a very valuable tool. It can also lead to frustration, misallocation of time & energy, and in many cases even depression.
Unfortunately these days, I hear more negativity about social media than I hear positive things. But that's not the platform's fault. It's your fault. We curate our own streams. We decide what we want to read and who we want to follow and interact with.
If your social media experience is causing you anxiety, then you're doing it wrong.
If your social media experience is anything other than inspiring, educational and rewarding, then you're doing it wrong.
If you find yourself constantly getting angry at something you read or someone you follow, then you're doing it wrong.
If you're not learning every day from the people you follow, you're doing it wrong.
The team at All Star Charts has launched a new report called the Minor Leaguers Report. This report will highlight small stocks showing signs of making the jump to the Big Leagues!
If the success of the Under the Hood report is any indication, I for one am very excited to have this expanded universe to pick stocks for making options plays.
Have you noticed that Consumer Staples are working on their lowest levels relative to S&Ps in over a decade?
Remember, underperformance from Staples is a classic characteristic of strong uptrending stock markets, which I'm not sure if you've noticed, we've been in.
Last week I went into detail about what we're looking for as a sign of a market correction. In fact, I showed 4 important factors we're watching. Make sure you're caught up on those here.
Today, I'd like to point out how one of those 4 signs continues to flash Green, meaning: Buy Stocks.
Here is the relative strength of Consumer Staples inverted. When the black line is moving up, Staples are underperforming. When the black line is moving down, Staples are outperforming. As you can see, underperforming Consumer Staples is consistent with higher stock prices and the opposite is also true, when Staples are outperforming stocks are usually under pressure.
It's that time of the year again. This is when we hear things like the "January Effect", the "First 5 Days of the Year Indicator", "Santa Claus Rally", "January Barometer" and all sorts of seasonal-type conversations.
Remember, we're right in the heart of "The Best 3 Month Period of the Year". You always hear, "Sell in May and Go Away", but as we pointed out on Nov 6th, it's waaaay more important to "Remember to Buy in November", or "Buy in October and Get Yourself Sober". Either one of those works.
Wall Streeters have all kinds of silly sayings to help remember important things. "The trend is your friend", "Don't fight the Fed", and "Bottom Fishing Can Be Hazardous To Your Wealth" are all good ones that you've probably heard before.
Today I want to talk about the significance of the Santa Claus Rally, and the fact that it might not even come at all. And that in and of itself would be the signal.
