Today's trade is in a $1B company that provides automatic identification solutions to commercial and government customers. Being that this company participates in the Software & IT sector, I expect it to perform well in a market environment where semiconductors are leading the way.
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.
There's no way the S&P500 can rally again this year, right?
We just had 2 consecutive years of historic returns. The Nasdaq literally doubled since the end of 2022.
Total Crypto Market-cap is now at $3.4 Trillion. It was only $750 Billion 2 years ago. You do the math!
The S&P500 was up 24% in 2023 and then up another 23% in 2024.
How could things possibly get any better than this? I mean with the Fed, and the Inflation, and the Trump, and the Recession and the imminent crisis they all keep telling us about.
How could stocks possibly go up again in 2025? After the historic returns we just saw in back-to-back years?
It's a new year and the market is looking forward.
It doesn't matter what happened last year, as far as our decisions are concerned. But let's not forget that humans are irrational, and they will certainly let the past year or two impact their decision making.
They can't help themselves. So it's up to us as traders and investors to extract those dollars for our own selfish reasons.
We're here to make money. Period. Taking advantage of human flaws is a great way to do that, as I've been showing you here every day for over a decade.
Yesterday we discussed the irrational behavior we're seeing from investors in the middle of a bull market. They're running scared, just as market breadth is improving to the upside, across multiple timeframes.
The Retail Investors are scared to death. And that's a good thing.
We don't want individual investors too optimistic. That's when stocks sell off. It's when they're pessimistic and worried that you see the best forward returns.
Go back and see for yourself. It's all public information. These are the people we want to fade. This is the "Dumb" money, so to speak.
Dig this. The first sentiment data for the year just came out from the American Association of Individual Investors with the fewest number of bulls since April of last year.
In the middle of the bull market, they're crazy scared.
Good.
Now keep in mind, this is specifically what they're saying.
But what are they doing?
Well, the Put/Call Ratio just hit new 4-month highs. This means investors are buying insurance (Put options) at a much faster rate than they're betting on higher stock prices (Call options).
That's also evidence that they're scared. Why else would you be buying insurance at such a fast rate?
