The parties are over. The dishes are done. The college football playoff is set. And now it's back to normal, right?
Wrong. At least when it comes to stocks, anyway, I think this party has a long way to go.
There will be lulls, but I expect us to be popping profit corks throughout 2024.
That may surprise you a little bit, because we had quite a blowout to end 2023. But then again, I have made no secret about being quite bullish for the coming year.
The S&P 500 gained 13.7% higher the last two months of the year, and the 15 stocks currently in our Quantum Edge Pro portfolio shot 17.7% higher on average – led by a phenomenal 71% surge in Photronics (PLAB).
After all that partying, our Big Money Index (BMI) enters 2024 well into overbought territory with a reading of 91.3. That's the highest since January of 2021, but not yet as high as June 2020 when it popped over 95.
And look what happened both times – stocks kept running, with the requisite wobbles along the way. There was still a lot of money to be made.
Source: MAPsignals.com
Interestingly enough, looking at data from the COVID-19 era and today makes for an uncanny mirror image – with distinct differences. This is important, because many investors are dubious of the latest rally. Let's do some quick comparisons from then and now.
First up, we have the BMI from June 2019 through June 2020. I've pointed out before how in January 2020 the market (blue area SPY chart) rose while the BMI started falling. Big Money was selling before the COVID news hit, even as stocks continued rising well into February.
Source: MAPsignals.com
The BMI kept falling far in advance of stocks until it hit oversold (the green dotted line), signaling a big reversion was near. Sure enough, stocks went on a monster two-year rally with the S&P 500 tracking ETF (SPY) soaring 115%.
In that rally, rivers of money flowed into small- and mid-cap stocks, which is always a bullish sign.
Fast forward to 2023 and we see a similar pattern in July and August. The BMI started falling out of overbought while the market remained somewhat resilient before cracking in September.
Source: MAPsignals.com
The BMI hitting oversold in October prefaced that rollicking end-of-year stock party. And once again, small- and mid-cap stocks were the life of the party. This time, we saw more buying than four months after COVID in half the time!
Another similarity: There was huge buying coming out of COVID – more intense than before the pandemic – and that same pattern of huge buying into the rally this time around.
Stocks are rising on unusually large volume, and that's the key. Buying like what we've seen the last two months – and saw after COVID – usually kicks off a big, sustained move.
We know that most of the money flowed into small- and mid-cap stocks both times. We also see the same sectors leading the way: Technology, Discretionary, and Industrials. In each case, growth stocks led us higher, and tech is the clear winner right now.
Source: MAPsignals.com
The Key Difference that Makes Now More Bullish
As I mentioned, the rally out of COVID more than doubled the S&P 500's value. This time around, we are only about 17% in.
There is one key difference, though, that works in our favor: interest rates.
When COVID hit, central banks flooded the world with money and 0% interest rates. Free money. That indeed sparked the economy and helped carry us through a crisis. The known side effect was the likelihood of inflation.
Inflation and rising interest rates to combat it defined the markets for much of the last two years. In 2024, the story should be the opposite – lower inflation and interest rates. The Federal Reserve has already telegraphed six rate cuts through 2025, and I suspect we will see the first one as soon as this quarter.
Lower rates + the resumption of earnings growth + strong employment + record levels of cash on the sideline all point to a long bull run for stocks… and a very happy 2024 for us.
We begin the year in great shape, with 11 of our 15 stocks making us money, and our winners bigger than our losers. The average Quantum Score for all 15 stocks is 75.3, which is right where we want it to be.
Our strategy to make the most of this year's opportunities is to continue owning the market's elite stocks with the best fundamentals, technicals, and Big Money inflows. And with the data strongly indicating a long and big run, we will use the inevitable wobbles along the way to grab more great stocks. I'm watching the return to full trading closely and will let you know as soon as it's time for our next move.
Quantum Scores for All Your Stocks
As you know, the Quantum Score is a big part our success here and in my own personal and professional investing. You can find it for all of the stocks in our Quantum Edge Pro portfolio, and I'm thrilled to tell you that as a valued member, you can now access the Quantum Score for all of the stocks rated in my system.
You can find it on your TradeSmith Finance dashboard. Just scroll down a little bit and you'll see it right underneath the Market Health widget.
You can enter the ticker or company name in the search box, and you'll see the Quantum Score as well as the Fundamental and Technical Score. It also displays some of our other Quantum Edge Pro stocks to the right.
Check it out, and please feel free to use it in your own stock analysis.
Here's to a happy, healthy, fun, and profitable 2024!
Talk soon,
Jason Bodner Editor, Quantum Edge Pro
P.S. Below you'll find the weekly ranking of the Top 10 and Bottom 5 stocks according to my system.
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