Non-members can get a quick recap of the call simply by reading this post each month.
By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big picture” point of view.
With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.
Until now, the answer to the Growth vs Value question has depended on what type of market cap conversation you're having.
Through the end of 2021 Large-cap Growth was still a leader. It was the Small-cap Growth stocks that had been crushed most of the year, particularly when compared to the performance of Small-cap Value.
You can see the new 52-week lows in IWO / IWN coming into 2022:
We’ve already had some great trades come out of this small-cap-focused column since we launched it 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 about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but it’s time we branch out a bit and allow some new stocks to find their way onto our list.
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.
Another week, another IT trade setup that we're looking at. While there is a pickup in the market sentiment, the ideas with most conviction are coming through from IT.
And it was a good one for most risk assets. Although the majority of stocks had their struggles at some point throughout the year, sector rotation continued to drive index prices higher. And it wasn't just stocks, risk assets in general had one for the record books.
The Average stock in the S&P500 was up 27.6% in 2021.
The Median S&P500 stock returned 25.2% for the year.
The market had been a mess for most of 2021. But even as the weakness persisted at the end of the year, we repeatedly highlighted the strength coming through in the IT space.
Well, this post is no different. We have breakouts, people! Let's take a look!
Below is the IT index with the important levels that we'd like to track.
Nifty IT has been sticking its head out every time we've looked for bullish momentum and strength in the market. And that strength is evident from the chart below when you look at the bottom pane of the chart. The relative strength pops right off the page. We can also see that the average drawdown has been a low 15% while most sectors have it way worse with no show of strength whatsoever.
Yesterday, we wrote a post about scanning for new lows, putting our own spin on a strategy called "Wall Street's only free lunch."
I was joking with JC that it felt a bit uncomfortable to search through such a weak list of stocks. After all, we’re used to scanning for strength.
But the scan was a fun exercise, and we found some weakness we want to be buying in secular leaders.
The universe wasn’t exactly full of strong stocks, as we were scanning for new 52-week lows. But that’s OK; we have plenty others for that.
In this post, we’re going to walk through another scan we did internally this week. Unlike the "free lunch," this one is more in line with our top-down approach of finding the strongest stocks in the strongest groups.
While we're still scanning for new lows, we’re doing so on a much shorter time frame, and we're adding additional filters to ensure all the stocks on our list are leaders.
Our Hall of Famers list is composed of the 100 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 100 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.
