These Underdog Stocks Are Set for Gold Whether you’re a sports fan or not, you have to admit the Olympics are exciting. The best of the best coming together to compete to see which athletes, teams, and countries come out on top. It’s incredible to watch, which is why NBC paid $7.65 billion for the broadcast rights. And the network said this week it expects record advertising revenue from this year’s games. Some of the best Olympic athletes that come to mind are swimmers Michael Phelps, Ian Thorpe, and Katie Ledecky, sprinter Usain Bolt, and gymnasts Simone Biles and Nadia Comăneci. But everyone loves a good underdog. Those no-name or injured athletes that come from behind to clinch a medal. Like in the 2020 Tokyo Olympics when Tunisian swimmer Ahmed Hafnaoui won gold as the slowest qualifier in the final. Talk about a comeback. Or this year’s sensation, Stephen Nedoroscik, who was brought on the men’s gymnastics team for one single event – the pommel horse. After waiting through the entire men’s team competition, he stepped up for his one event and helped clinch a bronze medal – the men’s team’s first medal in 16 years. He’s now a viral sensation. And who could forget when gymnast Kerri Strug made one final attempt at vault in the 1996 Olympics after injuring her ankle and limping to the start of the runway. After nailing her routine, she collapsed in pain. Her perseverance won the gold for Team USA and provided one of the more heroic moments in U.S. Olympic history. I think we can all agree that those underdog moments make far better stories and are more inspirational than when we see the best of the best win once again (though those moments can also be exciting). Like the Olympics and other sporting events, some specific areas of the stock market are having their underdog moment. We’ve talked about what’s going on in recent Power Trends issues, but I wanted to provide even more incredible data as this small-cap rally continues. It’s that important. Let's Recap the Small Caps Just three weeks ago, I wrote to you about the stock market acting pretty strange. Nearly 60% of stocks in the S&P 500 – or 300 out of the 500 – were below their 50-day moving averages. That’s a widely used technical indicator, and stocks below their 50-day are considered weak. To make matters worse, Bank of America research showed that most of the S&P 500 had been in an earnings recession since January. More specifically, 493 of the S&P 500 – basically all but the Magnificent 7 – had not grown earnings since the fourth quarter. That all changed just a week later when the Russell 2000 tracking ETF (IWM) popped 3.59% on July 16. The Russell 2000 is the small-cap index, and that immense move equated to about $93 billion in added value. The next day, the index was up another 1.3% – about $30 billion. That positive move has only happened 145 times since IWM came into existence in May 2000. That’s only 2.4% of all trading days in the last 24 years. Even more, the NASDAQ tracking ETF (QQQ) – which tracks the 100 largest non-financial companies – fell 2.19% in one day around that same time. There was a clear shift happening from those few mega-caps that were hogging the market to smaller stocks. And it’s still happening. I think this will end up being the most important development in the market in 2024. Small-Caps for the Win Small-cap stocks are the new Ahmed Hafnaoui – the smallest qualifiers in the market that are winning the gold medal right now. And based on historical trends, these stocks likely have even bigger upside ahead. My colleague Luke Downey dug into one of his killer signal studies, and it shows just how bullish that 3.59% one-day gain in the Russell 2000 I mentioned earlier is. Notice that 40% rip after 24 months. 
And more recently, the NASDAQ 100 fell 3.65% on July 24, steeper than its 2.19% fall earlier in July. Notice the forward returns when this rare occurrence happens. 
That 24-month return is about average for the market, but it’s nearly half that of IWM. That’s incredibly convincing. But if you need more, I have it. We know interest rate cuts are coming. At yesterday’s Federal Reserve meeting, Chair Jerome Powell finally stated that the first rate cut since 2023 could be on the table for September. That’s great news – arguably the biggest catalyst to pull the record amount of cash on the sidelines back into stocks. When rates are cut and there’s no recession then or a year later – which seems likely – stocks historically rally. And small-caps rally the most, up 36.6% on average over the next two years versus 26.8% on the S&P 500. 
This is a rare opportunity you don’t want to miss out on. And now is the time to get into small-cap stocks before the throng moves in. This rotation into smaller stocks should last a while and is potentially huge. And those are exactly the kinds of stocks we focus on in my Quantum Edge Pro service. In fact, just yesterday we added a small-cap stock in Quantum Edge Pro – the smallest in our whole portfolio. And with an incredible Quantum Score of 82.8, it is set to benefit from this massive rotation into smaller stocks that have been the underdogs for a long time. It’s not too late for you to get in on this stock or other smaller companies with strong fundamentals and technicals and Big Money inflows. If you’d like access to this new recommendation plus my powerful Quantum Score tool, click here to learn how you can join Quantum Edge Pro today. Talk soon,  Jason Bodner
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