In true commodity supercycles, shiny yellow rocks outperform stocks.
Last week, we outlined why we thought buying gold and selling stocks was a good idea. If you haven't had a chance, you can check out that post.
But that's not it.
We've also been pounding the table on how bullish we are on the precious metal mining stocks. They're testing a key level of polarity relative to gold futures.
This is the level where the miners begin to outperform gold.
We're also heading into the sweet spot for junior gold mining stocks based on seasonality.
As more stocks, more sectors and more countries around the world start to participate in this bull market, any of the short sellers who overstayed their welcome are getting blown up.
Good.
This is a classic characteristic of healthy bull market environments. I would encourage you to go back and study every bull market ever. You'll find that investors who own stocks are much more profitable than those who are selling stocks.
It's just math.
Here's the thing about short sellers that I think gets forgotten. Short sellers are guaranteed future buyers. Longs are only promising to be future sellers.
The thing is that when shorts are getting squeezed, these can become forced liquidations. And margin clerks don't use limit orders. They'll spray the market, and it will crush you if you're on the wrong side of that.
But if you're on the right side - pay day!
Here is a list of stocks where short sellers are the most vulnerable to get blown up:
Welcome back to Under the Hood, where we'll cover all the action for the two weeks ended January 3, 2025. 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.
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.
We've also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It's got all the big names and more–but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let's dive in and take a look at some of the most important stocks from around the world.
In this scan, we look to identify the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
I've been getting this question quite a bit lately: Does Breadth even matter?
And the answer is yes. It's a market of stocks.
Go back and study all the bull markets in history. You'll notice how as the bull market progresses, you get more and more stocks participating to the upside. You tend to see sector rotation and new leaders emerging. You also see expansion in participation across countries around the globe.
This is what is currently happening. It's all of the above.
In Bear markets, however, these things do not happen. It's actually the opposite. You see fewer and fewer stocks going up, while more and more stocks are breaking to new lows. The sector rotation turns into the last leaders catching down to the losers. And you see stock market indexes in countries all over the world falling in price, not rising.
When you weigh all the evidence, it's quite obvious that we are currently in the first category, and certainly not in the second one.
How can market breadth be deteriorating, when participation just keeps expanding?