We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Stocks Fail at Key Level
A wide variety of risk assets have suffered significant corrective action dating back to last year. As such, we’ve gotten used to looking for logical areas of potential support, or levels where we could expect demand to enter the market.
No levels have provided a better guideline than the prior-cycle highs from 2018. And when it comes to the stock market, no index provides us with a more comprehensive view of the price action than the Value Line Geometric (VLG), shown below. The Value Line is composed of roughly 1,700 components and is designed to measure how the average - or more specifically, the median stock is performing.
As you can see, the median stock is currently rolling over after a successful retest of its 2018 highs. As long as the Value Line is below 595, stocks are likely to remain under pressure.
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
Ernest S. Rady, the chairman and CEO of American Assets Trust $AAT, continues to appear on our list with his eighth Form 4 filing in the trailing month.
Rady reported his latest purchase on Friday, revealing another 25,000 shares, equivalent to $719,600.
Our Hall of Famers list is composed of the 150 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 150 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.
The bulls have moved back into the driver seat over the past few months, as a good deal of technical damage was repaired during the summer rally.
It appears that the weakest stocks have at least stopped falling as growth indexes have transitioned to more constructive, base-building action since late Q2.
And, more recently, the strongest sectors during the current cycle have reclaimed key levels.
We’re talking about materials rallying back into their old range and energy stocks resolving above a shelf of former highs.
As both cyclical sectors are now back above our risk levels, we are looking for the strongest stocks to buy to express a bullish thesis on these groups.
When we think about the strongest stocks within materials, the coal industry and its recent resilience is top of mind.
We see no reason why the relative strength from these stocks shouldn’t continue, so let’s dive in and outline some of our favorite charts in the space.
The largest insider transaction on today's list is a Form 4 filing by H Partners Management, which reported an $11.6 million purchase in the theme park Six Flags $SIX.
The hedge fund has a total stake of 11.50% as well as a seat on the board.
