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.
Welcomeback to our “latest Under The Hood” column for the week ending January 25, 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 All Star Charts we follow a top-down research approach whereby we track all the asset classes and global markets in order to arrive at our view. In our weekly analysis, we carried out the same process and saw a pattern worth mentioning.
The latest E-Trade StreetWise survey, which is put out quarterly, revealed most investors (66%) believe the market is in bubble territory, and another 25% think it’s approaching one.
Check my math, but that's over 90% of investors thinking we're in or near a bubble.
A bubble!
Everything needs to be a bubble.
You see why we can't have nice things?
I mean, what ever happened to a series of higher lows and higher highs defining an uptrend?
Too simple?
Not intellectual enough for you?
Fine. Let's get into facts.
The Dow Jones Industrial Avg and Dow Jones Transportation Avg did nothing for almost 3 years, and just broke out in the 4th quarter last year. Is this a bubble? Or just the beginning of a new uptrend?
When we take a step back, this all jives with what we're seeing in other asset classes as investors are rushing into risk assets as they position themselves more offensively.
This development really began last March as the market was bottoming from its swift Q1 selloff. Although the relative trend really accelerated in early September as Mid, Small, and Micro-Caps began to drastically outperform their Large-Cap peers.
Let's take a look at how this cap-rotation has impacted some of the secular leaders at a sector and industry level.
Nifty 50 has gone ahead and given us a signal of caution after a relentless rally. While we have seen days of a pause in short-term momentum in the past, this time around there's a slight difference.
Let's take a look at the daily chart to see what we've got here.
It's not a new chart - in fact it makes the rounds on a fairly regular basis.
The iteration I saw this week showed the relationship between global money supply, stocks and high yield bonds over the past five years. The trend for all three was the same - up and to the right, with early 2021 bring a fresh round of new highs.
For whatever reason, my first thought on seeing this version was that Wu-Tang Clan had it right all along.
