The Mega-cap names have been digesting their 2020 gains since early September. Go one by one and most of them are down over the past 3+ months. All except the last one at the bottom.
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.
In last week's report, we discussed the continued rotation into SMIDS, international markets, and risk assets. Our conclusion is and continues to be that the market remains in a very healthy state of order.
FICC markets are also confirming the move higher in equities.
From a short-term perspective, SMIDS digesting their recent gains would be a healthy development.
Welcome to our “Under The Hood” column for the week ending December 11, 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.
I'm not sure when this happened. When did they start grouping any company that uses a computer into the Technology Sector?
First of all, 80% of the FAANG stocks represent a ZERO weighting in the Technology Sector. ZERO.
Facebook and Google are in the Communications Index, together representing approximately 45% of that sector. Combined, $FB & $GOOD represent ZERO percent of the Technology Sector. Netflix $NFLX accounts for another 4% or so Communications, and again, a ZERO weighting in Tech.
Furthermore, Amazon represents approximately 21% of the Consumer Discretionary Index. When you look at the Technology Sector, you'll find that $AMZN has a ZERO weighting.
The latest version of journalists grouping any company that uses a computer into the "Technology Sector" is Airbnb and DoorDash. Neither one of these are in the Tech sector, but instead are both in the Communications Index. Together $ABNB & $DASH represent a ZERO weighting in Tech.
Meanwhile these are the fairytales they feed you...
Japan continues to rally as it breaks out to new 29-year highs.
And just think, the Japanese Nikkei225 can rip another 40% from here and still not get back to its highs from the late 1980s. That's how long it takes a bubble of that magnitude to correct itself.
Let's remember, at its peak in 1989, the real estate value of just one single park in Tokyo was worth more than all of the real estate in the state of California combined. I've been to that park. It's ok I guess. But not worth more than all of Cali, quite obviously.
So here's what that Nikkei chart looks like today:
During bull markets I always get asked about when it's going to stop. I don't get asked about stock market bubbles and unsustainable valuations during bear markets, that's for sure. Those environments come with other kinds of funny questions.
This morning I woke up to one of my college buddies telling me that tech valuations are too high and that this has to be a bubble.
Journalists ask me every day how this can possibly continue. "Too high", they say. "Too fast", they tell me. "Fed Printing", they claim. "It's only 5 stocks!!!"... I can't.
Anyway, maybe this is the top. Maybe we are about to crash. Maybe valuations are too high....
But there's no evidence at all that this is the top. New All-time highs are not characteristic of downtrends. They are things we see regularly in uptrends. In fact, new highs are perfectly normal, and should even be expected in this type of environment.
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.
Dividend aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to longer-term minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve. That’s why we're turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for 5-9 years.
Introducing the Young Aristocrats. We like to say these are "stocks that pay you to make money". Imagine if years of consistent dividend growth and high momentum & relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.
Few things take the mind on a flight of fancy like the thought of interstellar space travel. Who hasn't taken a look at the night sky and wondered what's up there?
Richard Branson took a look and wondered the same thing. Only, he decided to try to make it happen. Enter: Virgin Galactic, a company looking to open up space for recreational travel.
Investors seem to be willing to bet along with Sir Branson that humanity with believe space travel is a worthwhile exploration. This chart here shows $SPCE on the verge of emerging from a 10-month base. And as JC often says: "The bigger the base, the higher in space!" And that couldn't me more appropriate than here.
I don't want to keep talking about the same asset, you guys know we pride ourselves in looking for opportunities all over the world and across asset classes. But this Bitcoin scenario right now presents us with the perfect opportunity to explain what overwhelming amount of supply looks like. So bear with me, no pun intended (ok maybe a little).
Our upside objectives in Gold and Bitcoin were both hit recently. They were the former highs from 2011 and 2017, respectively. We discussed this in our Greater Fool discussion.
But WHY were those our targets? WHY were we, and still are, so focused on those former highs?
The reason is because it is a FACT, that last time Bitcoin was up here just under 20,000 there was more selling pressure than buying pressure. There was more supply than demand. This isn't like "JC's Opinion", or the opinion of my team. These are just facts. Bull or bear, bitcoin cult leader or not, you can't disagree there. Last time prices were up here, they fell. And they fell hard.
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?
