It's nothing new for us who keep track of this stuff regularly. We're seeing a lot of new highs. In fact, we saw more new highs in November on both the New York Stock Exchange and the Nasdaq than we've seen since early 2018.
We're not seeing deterioration in breadth, like we saw in January/February 2020. We're seeing expansion of breadth. We're seeing more participation, not less. More countries are breaking out to new highs, not fewer. These are all characteristics of bull markets and uptrends, not bear markets and downtrends.
They keep telling me that Tech and Discretionary and Communications are no longer participating. But then when you look at the small and mid-cap indexes of those sectors, they've been breaking out to new highs. But now, just to really piss off the permabears, the large-cap indexes are breaking out as well:
After a massive run in the Nifty Major Indices over the last three weeks, Wednesday we got our first sign of waning enthusiasm and a key inflection point to trade against.
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 relative strength trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
Last week, we mentioned we were no longer in a split market, but rather in an environment supported by strong internals and an aggressive appetite for risk assets.
This week, we're preaching much of the same.
We continue to see rotation down the market-cap scale, into Micro-Caps and SMIDS, confirming the strong underlying market internals.
If Semi's are leading, how bad could things be for the stock market?
As you can see in this chart below, not only are Semiconductors outperforming the broader markets, but they are also breaking out relative to Technology stocks as a group.
Welcome to our "Under The Hood" column for the week ending November 20, 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.
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.
