Hi friends,
Navigating global markets in the last few weeks has been an interesting affair, to say the least. After the April tariff crash, popular large-cap indices across the globe have recovered back to or near old price Highs made back Feb/March, staging a mind-bending power rally rivaling 2023 Nov/Dec and the 2020 COVID recovery:
USA (S&P 500):
Europe (STOXX 50):
Europe (DAX 40):
Australia (ASX 50):
Canada (TSX 60):
Japan (Nikkei 225):
Hong Kong (HSI):
The strength of these rallies however, apart from their visual appeal, remains mixed and depends heavily on the marketplace we’re looking at.
USA
Specifically concerning for the US is that none of the problems that rendered the market weak before the April crash have disappeared since. The rally is top-heavy and driven by the old tech mega-caps and NYSE-type industrials (machinery, engineering, aerospace), there are very few stocks making new Highs with a clear divergence against the indices, the extreme split between NYSE and NASDAQ remains, and small- and mid-caps are severely lagging behind their large-cap companions – see below the Russell 2000 and S&P 400:
Most poignant however is the behavior of leading stocks. Though there is a group move in industrials, only an anemically small number of new strong leading issues has stepped into the power vacuum, a whole host of damaged and broken old FOMO leaders have wedged back to old Highs (e.g. QBTS, IONQ, RKLB, SMR, HOOD), moves out of mostly-faulty digestions are almost all fizzling out or immediately whipsawed (see ADMA, PLTR, SFM, BTSG, BROS, HIMS, KRMN, SMA, just to name a few), and exuberance in tech IPOs has returned (e.g. ATHR, CRWV). Even among the ‘Magnificent 7’ blue-chips there are divergences, with AAPL, TSLA and GOOGL not rallying substantially, leaving MSFT, AMZN, META and NFLX the last men standing.
While the index move looks inviting and is surely causing fear of missing out in passive- and blue-chip “investors“, for trading in stocks I need to see an improvement across the board to be willing to take any risk in this marketplace right now.
Europe & Israel
While many European indices have rallied back into the old Highs, the move looks extended. This of course doesn’t mean it won’t continue, but the risk of entering right here is elevated.
The only worthwhile group move visible to me are the defense issues (see below a STOXX Europe Aerospace & Defense ETF), which however right now are undergoing a severe cross-group pullback (specifically in the strong R3NK, MILDEF, RHM), which might set up new digestions but also put an unlikely but possible end to the move. The next few weeks will tell yield us more insight.
The strongest names on my watchlist right now are: R3NK, THEON, FCT, EXA, MILDEF and RHM in Europe, and also ARYT from Israel.
Japan
Though the strong bounce on the indices is not reflected by a whole lot of individual stocks running into new price Highs, there has been somewhat of a starting group move in IT-, software- and tech IPOs. Strong names right now are 218A, 323A, 325A, 276A, 300A, 338A, 350A, 343A, 332A, 290A, 341A, 335A, 5592 or 299A. A fine but late-stage gem is 4784.
I currently have several positions in some of these stocks. I will be adding exposure subject to success, which has been great in some instances and weak in others, as should be expected – not everything can work well, nor do we need it to.
Though this group move might just be a similar effect to exuberance re-entering the US market, I’ve seen a whole bunch of digestions featuring accumulation signatures, and moves into new Highs are typically supported by continued buying demand.
China & Hong Kong
Despite the side-ways move in the indices, there is a relatively broad move across multiple industries visible. As is typical, trading in these waters can be difficult due to exchange restrictions for foreigners, board-lot, and an overall different trading character to most US- and European exchanges, however strong trends are visible in many stocks, and money can be made. Strong issues include 301209, 002891, 688648, 688578, 300804, 302132, 300972, 002365 or 000766, just to name a small bunch.
The Hong Kong market specifically show a good concentration in precious metal-exposed issues (e.g. 3330.HK, 3939.HK, 6181.HK) though not all moves are successful and trading is haunted by chop. As well, investment managers/brokers and some tech issues (e.g. 2149.HK) are getting traction.
Australia & Canada
As indicated previously, I believe that a lot of the strength in both these countries at the moment is due to precious metal miners (gold, now also silver) and related sentiment spillover. Strong issues in Canada are TXG, AAUC, OLA, GMIN, CNL, AII, MAU and DSV, while the best names in Australia are currently BGD, MPK, VTX, MTM or CYL, but also a few non-mining issues (MPW, CAT).
Opportunities are currently forming, as I see no reason – at least not yet – why the gold and silver rally should terminate anytime soon. Tread carefully though, as many of the issues, especially the Australian miners, are thinly traded and prone to dangerous whipsaws in trading.
So long,
TGS