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 to profit in the weeks and months ahead.

As we discussed in our latest report, bears are running out of any substantial fuel to support their position.

And despite the arrival of some long-awaited selling pressure last week, that absolutely remains the case.

In case you didn't see my Saturday morning note, it seems to have struck a chord with a lot of people.

You see, somewhere along the way, people ignorant to reality just assumed that if we did a better job of educating investors, then it will prevent them from making reckless decisions in the stock market.

It's so adorable to believe that.

I mean, you can tell yourself it's all rainbows and butterflies, if you want to. You have that right.

But it's complete nonsense. The truth of the matter is that it's an ugly world out there. Grow up.

You can try to help these people all you want. It's not going to matter. That's just not how humans work.

I reached out to a colleague who's much better on the science side of this, and here's what he had to say,

From the desk of Steve Strazza @Sstrazza

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.

In light of this week's events, I hope it’s become more clear than ever to you that it is MUCH MORE important for traders & investors to focus on the behavior of markets themselves, instead of the goods and services in which the market deals. 

Technical Analysis represents the former, while "fundamental analysis", we're told, represents the latter. 

I came to this revelation in 2005 when my $MECA completely collapsed because some activist hedge fund manager wasn’t able to accomplish the things he said he would or that we were betting on him doing.

I lost like 70-80% or something like that. Plus, you have to include all the opportunity cost in me not owning the other things, considering it was an epic bull market and I was sitting there buying this p.o.s. $4 horsetrack in Baltimore 

You live and learn right?

Now you know part of the reason why I am the way I am. 

From the desk of Steve Strazza @Sstrazza

As our Premium Members already know, we have a laundry list of scans that we run internally on an almost daily basis.

Different market environments, naturally, are more conducive to certain scans and less so to others.

For example, running our "Short Scan" right now is an absolute waste of time (which in itself is information about the current state of the market). On the other hand, our "Minor Leaguers" is perfect for the current environment due to its focus on Small-Cap stocks.

Our "Squeeze Scan" is also absolute gold for the current market. While Gamestop $GME is stealing all the thunder these days, it's not the only stock being propelled higher by short covering. It's happening more or less across the board in the most shorted names.

In fact, if you were to treat these hated stocks as a basket, they'd be outperforming even the strongest industry groups right now.

I think we can all agree that we learned something this week.

No matter who you are or how long you've been at this, we all learned SOMETHING after this week's events.

Some investors learned about short selling and short squeezes (my wife, for example). Others now have a better understanding of how brokers work and the fact that pretty much all of them sell their order flow. None of this is anything new to us, of course, but it is to a lot of other people.

I personally learned more about some of the Dodd Frank regulations, almost by osmosis. I mean, how could you not? But I realized that I officially care less about all that stuff than I did before. Talk about boring!

Anyway, the funniest part of the whole thing has to be the people screaming for more investor education to prevent this irrational behavior in the future. "We have to protect investors from themselves", "Brokers need to educate their clients"....etc etc

This is hilarious. They think that making people take some tests or answer questions is going to stop them from making reckless decisions????

Are you crazy?

Do you not know how humans work????

From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts

The market is giving us absolutely no reason to play defense right now.

Regardless of the asset class, it's the risk-takers that are having their way in this environment.

Investors stretching out along the risk spectrum is a point we've been hammering home for some time now, particularly in our weekly RPP Reports - like this one.

Not only is this true on absolute terms, but we're also witnessing cross-asset relationships progress higher and in favor of risk-asset which can only be taken as a positive.

It's not often we see all asset classes in agreement with each other, but when we do, it's a significant driving force that supports the risk-on trade and suggests higher prices to come.

From the desk of Steve Strazza @sstrazza

Our most recent Under The Hood report was packed with a handful of buying opportunities. As usual, these names are all exhibiting bullish relative strength and offering investors well-defined risk levels to trade against... and of course, reward profiles skewed heavily in our favor.

In an environment like this one... where areas far and wide are making new highs, and even the weakest corners of the market are participating, there is no shortage of strong stocks floating to the top of our bottoms-up scans.

In recent months, this column (as well as the Minor Leaguers) has been dominated by smaller-cap names as SMIDs and Micro-Caps have been where all the buzz is among investors these days due to their aggressive outperformance.

Makes sense, right?

This is the video recording of the January 28th Town Hall Meeting w/ Willie Delwiche & JC Parets.

01/28/21 2PM ET

We noticed a weakening momentum in several indices across the globe even as big talk of 'Budget correction' started to gain traction. In order to benefit from the short-term negative move, we identified strong and weak sectors over a short-term time frame. For the first time in a long time, we also shared a bearish trade idea in our Trade of The Week post.

Today we're going to look at some more short setups that are on our radar, in order to benefit from the dip in momentum we're witnessing.

Read on to know more.

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

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.

From the desk of Steve Strazza @Sstrazza

We updated our Breadth chartbook a few days ago which Premium Members can check out here.

There are literally hundreds of charts with various breadth indicators from new high/low and overbought/oversold percentages to A/D lines, and more for not only the major averages and indexes but also each Large-Cap Sector SPDR.

What's this month's takeaway after spending a morning digging through our expanded workbook (that's right, there's more)?

Market internals continue to be a tailwind for stocks as we saw an improvement in the vast majority of our metrics again this month.