In a further effort to identify individual equities that fit within our larger Macro thesis, we recently rolled out our latest bottoms-up scan: "The Minor Leaguers."
We write a post every other week where we outline some of our favorite setups from the watchlist.
We've already had some great trades from this universe and couldn't be happier about the early feedback.
Moving forward, we'll be rotating this column with "Under The Hood" each week.
In order to make it onto our Minor League list, you must have a market cap between $1 and $2B. There are also price and liquidity filters.
Then, we simply sort the stocks by their percentage from new highs. Easy done.
From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
Over the last few months, there's been a distinct rotation into Financials and other cyclical areas across equity markets not just in the US, but across the globe.
This topic is nothing new around here as it's been a big theme for us recently. Consider some of our calls from this month:
Intermarket analysis is always an area of focus over here at All Star Charts. Right now, there are a lot of changes taking hold beneath the surface in some key cross-asset relationships.
For the longest time, the alpha has been in the US... it's been in large-caps... and it's been in growth stocks. That's been the playbook. We know because we've been running it back for years now.
Although, we're seeing strong evidence that this is no longer the case...
One of the best things about our approach is that it allows us to be incredibly flexible and adjust our views as new data becomes available.
We pride ourselves on never being dogmatic. Speaking of which, despite how much we've leaned on secular leadership from growth and tech stocks in recent years, the data is suggesting we reposition ourselves in favor of Value (read more about it, here).
The bottom line is breadth has been overwhelmingly bullish and is one of the main reasons we're in the camp that this is likely the early innings of a new cyclical bull market.
Whenever I want to talk about bonds, I always know just who to call. Larry McDonald is a former bond trader at Lehman Brothers and author of the book, Colossal Failure of Common Sense. I highly encourage you to give it a read, especially if you're looking for some perspective on what really happened back in 2007-2008.
It's no coincidence that I reached out to him to come on the podcast. Larry and I had a very timely conversation in February of last year. So with the bond market recently losing 5-6 Trillion dollars in such a short period of time, who better to talk to than by favorite bond trader.
Here we go with our next round of the Top-Down Take post. At All Star Charts, we like to keep things simple and look at the bigger picture. We let the charts speak to us and then decide what to do. Always remember, the Trend is our Friend.
Today we’re taking a look at a sector that has been an outperformer in the recent past despite broader market correction. Nifty Metal is now moving from strength to strength as more constituents break out of long-term bases.
Some of us are old enough to remember a time when Value stocks were the place to be. The kids these days look at me like I'm nuts when I talk to them about banks and energy stocks!
There's a whole world of companies that used to do great. In fact, early in my career these were the names to be in: BTU, WLT, LEH, MER, BSC..... Good times!
Tech and all that other stuff came much later and has been the big driver in the U.S. over the past decade. But the rest of the world has suffered, without that exposure to Tech and Growth, and instead loaded with banks and natural resources, the worse places on earth for some time now.
Fast forward to today and we continue to get more and more evidence suggesting that it's changing.
It's no longer US over International and EM. It's been EM and International over US. It used to be Growth over value for so long.
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.
Look at last year, for example. By the time the S&P500 finally put in its high in February, everything else had already been falling apart. Small-caps, Mid-caps, Micro-caps, Financials, Transportation, Emerging Markets, New Highs list, Advance-Decline Line, the Value Line Index and S&Ps relative to its alternatives had all been pointing to stocks falling.
There was more data early last year suggesting to be completely out of stocks, and in bonds instead, than before any other crash in stock market history. We discussed this last week.
But even if you ignored all of those factors. And you just looked credit, you would have seen Treasuries significantly outperforming the rest of the bond market. Credit told you:
Welcomeback to our “latest Under The Hood” column for the week ending February 19, 2021. As a reminder, this column will be published bi-weekly moving forward, and rotated on-and-off with our new Minor Leaguers column.
In this column, we 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.
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 to profit in the weeks and months ahead.
Every major asset class on Earth continues to illustrate risk-taking behavior on the part of market participants.
Yields, Oil, Equities, Base Metals, the Australian Dollar -- there's an overwhelming amount of new highs in offensive areas of the market right now. The weight of the evidence continues to suggest that we want to bebuyers, not sellers, of stocks.
