We love our bottoms-up scans here at All Star Charts. We tend to get really creative when making new universes as we want to be sure they will deliver us the best opportunities the market has to offer.
However, when it comes to this one, it couldn't be any simpler!
With the goal of finding more bullish setups, we have decided to expand one of our favorite scans and broaden our regular coverage of the largest US stocks.
Welcome to The Junior Hall of Famers.
This scan is composed of the next 150 largest stocks by market cap, those that come after the top 150 and are thus covered by the Hall of Famers universe. Many of these names will someday graduate and join our original Hall Of Famers list. The idea here is to catch these big trends as early on as possible.
There is no need to overcomplicate things. Market cap is a quality filter at the end of the day. It only grows if price is rising. That's good enough for us.
I get it. The yen was cast as the villain decades ago, and something or someone must take the blame for the VIX hitting 65 earlier this week.
While I prefer to point my finger at the preceding low-volatility environment, the November election, and potential rate cuts, the yen certainly played a part.
But the real question isn’t who, what, when, where, or why.
Instead, every investor wants to know…Was that it?
Is the selloff over?
I think the worst is behind us.
Here’s why…
Check out the USD/JPY chart with a 200-day simple moving average in bright blue (with the percentage above or below the long-term average in the lower pane):
In many ways the yen carry trade is a play on interest rates.
In order to have a bear market, or a correction of any kind, the prices of stocks need to fall.
That's just math.
But you know what hasn't happened? We really haven't seen the new lows list blowing up at all.
You would think that Monday would have seen a lot of new 52-week lows, considering the VIX practically tripled overnight, for the first time in the history of the stock market.
Welcome back to Under the Hood, where we'll cover all the action for the two weeks ended August 2, 2024. This report is published bi-weekly, in rotation with The Minor Leaguers.
What we do here 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.
1) For long-term investors, this is what you want. Many of us have long-term accounts, retirement stuff, kids college funds, etc. This sort of market action is great for those types of accounts and strategies. And if you're a young investor, just getting going in this business, nothing could be better. Pay attention and take notes (you'll thank me later).
2) For more tactical portfolios, this sort of volatility provides new opportunities, that certainly did not exist in the low volatility regime that we've been in for so long. This is not the time to implement low volatility strategies. This is a time to benefit from the high volatility.
3) When shit hits the fan, just get smaller. Markets are moving fast, so you can get away with much much smaller position sizing in order to accomplish the same goals you had with a VIX at 10, just a month ago.
The rule of thumb for me is you take the VIX and divide it by 16. That gives you the expected % move for the market that day - particularly the S&P500.
Remember, over the short- to intermediate-term, stock prices don't move based on the fundamentals. They move up and down based on positioning, or in many cases, a lack of positioning.
When no one wanted Tech and mega-cap growth at the end of 2022, that was when Tech and mega-cap growth really got going.
Before that, when everyone wanted high growth Tech, Cathy Wood was the next Warren Buffett, and that's when Tech stopped working for a while - and is still not working in many of cases.
Natty gas is falling below two bucks. Copper is retesting four. And corn is rolling to its lowest level since 2020.
But of all the vulnerable commodities contracts, only one area stands out as a viable short: cattle.
Feeder cattle futures closed below 250 this afternoon, triggering a sell signal:
Notice the 14-day RSI led price by registering a new multi-month low ahead of today’s breakdown. The waning momentum speaks to weakening demand and the possibility of a swift move lower.