Hello friends,
A month has passed since the US election and the latest rate cut, and with the Trump rally markets have been ripping … at least the indices. There has been a general economic upswing in sentiment, most prominently in Small Businesses. As the latest NFIB SBET survey can be quoted, “the election results signal a major shift in economic policy, leading to a surge in optimism among small business owners”.
Along this surge in optimism have come some money inflows and, at least initially strong broadening-out of the market through to small- and micro-cap segments, as we will discuss further below.
As you may see in the charts below comparing the SP500 (SPX), it’s equal-weight version (RSP) and the NYSE Composite and the NASDAQ Composite (COMP), all popular indices have started trading near all-time New Highs in price.
With SP500 and NASDAQ especially leading over the last 2 weeks while NYSE and RSP lag, it is clear that the all-too-popular Big Tech TSLA, GOOGL, AAPL, AMZN, META etc., which had been lagging July to November, are trading once again near all-time Highs and pressuring the two famous indices higher while the rest of the market is taking a breather.
More so below, the Russell 2000 (RUT, small-caps) and the IWC ETF (micro-caps), have finally started confirming the advance, with the IWC just emerging from year-long bear market territory and the RUT just about to pierce the all-time Highs:
Such a change was exactly what was missing to the US markets to strengthen. However, the dominance of NYSE-type issues over the broader growth segment (see divergence in A/D lines here) still suggests that not all is amazing that looks so.
Stocks that are leading the market near the Highs are typically “old-world” cyclicals – industrials, financials or resource stocks that do harbor opportunities to make money, but which do trade quite differently to growth issues … and on average move much slower. On top, the US is again the most crowded equity market on the planet, and you can tell.
That is not to say that there are no growth leaders, it is just that so far their trading character can only be described as choppy, erratic, almost across the board. The best names in my opinion in the US are RDDT, AS, RBR, INSM, RKLB, ADMA, VST, TLN, VRT, SN, APP and PLTR. Scan charts of these stocks for reasonable low-risk entry points, you’ll have a hard time finding any proper ones, though there were some high-risk opportunities available. With the current outperformance of the software group (of course to a large degree driven by crypto stocks), APP and PLTR, two old names from 2020/21 that never had a chance, are probably the best candidates regarding trading character and liquidity, and the current pullback might just ease these stocks into well-shaped digestions. Time will tell.
Summarizing for the US – markets remain choppy overall despite the indicative index uptrends, but leadership is emerging. Should favorable entry points materialize, we stand to see a good chance at making larger profits again as compared to shorter-term trading, which the market had forced upon us since 2021. I share the expectation that this fuzzy and overconfident market will at some point fizzle and reverse, like many adroit fund managers are expressing vivaciously – but that top might still be many months if not multiple years out.
Other marketplaces currently rocking are Australia and Canada (many small miners and O&G issues), a broad offering in Singaporean stocks, and somewhat muted but still present opportunities in the Japanese, German, Swedish, Norwegian and Italian markets, in stark contrast to weakness in Danish, Finnish, Polish, French markets. To list all the strongest stocks from the mentioned marketplaces would explode the scope of this report, however screening for 52-week Highs and looking for classical accumulation signatures will point you in the right direction.
So long,
TGS