Last night was the big LIVE Event that I host at the beginning of every month.
There is no better way to start a new month, and in this case a new quarter, than going one by one and identifying the direction of primary trends for the world's most important stocks and assets.
Just for perspective, here are the S&P500 and Nasdaq100 Quarterly Candlesticks making new all-time highs, again.
As you can see, these are the types of things you tend to see in bull markets. You do NOT see them in bear markets.
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 now, a company must have a market cap between $1 and $4B.
We saw some of the most bullish sentiment readings in years. And this sentiment came after a historic rally for equities throughout the 4th quarter last year that couldn't miss. Everything was working.
But things can't just go up forever. They need to rest eventually, and reset some of that excessive optimism.
That's exactly what happened.
Despite some of the growth indexes making new highs, a lot of the most important groups of stocks have done absolutely nothing since February.
Look at Consumer Discretionary, Financials, Industrials and Healthcare trading sideways to down this entire time:
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 $3T – to some of the new-age large-cap disruptors such as Arista Networks and Crowdstrike.
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. Click here to check it out.
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.
While the market remains a mixed bag and participation is lacking, we're still seeing evidence of risk appetite.
How do we know?
The stocks that investors are betting against the most are making big moves... to the upside.
And we know just what to do in these environments.
We find the most heavily shorted stocks in our freshly squeezed universe. We wait for momentum to come into these names, and then we ride them higher with the squeeze.
We got new short data recently, so let's talk about how we're playing it.
Our scan is quite simple. It is designed to identify stocks with the most aggressive short positions. When a stock is shorted, it means incremental buyers are waiting in the wings to close out their bearish bets.
We love this, as new buyers are the one true catalyst for higher prices.
When shorts are proven wrong, they become buyers of the stock. In many cases, this happens as momentum flows into these names and fuels massive short-covering rallies.