From the Desk of Steve Strazza @Sstrazza.

Welcome back to Under the Hood, where we'll cover all the action for the week ended March 31, 2023. This report is published bi-weekly and rotated 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 are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks that are seeing an unusual increase in investor interest.

Click here for a behind-the-scenes look at our process.

Whether we’re measuring increasing interest based on large institutional purchases, unusual options activity, or...

I've argued for years that the Dow Jones Industrial Average is the world's most important stock market index.

It's a list of the most important stocks in the most important country on the planet.

Find me a better index.

You can't. I've looked.

And when you look underneath the surface at the components of the Dow, you'll notice that its Advance-Decline line is pressing up against all-time highs.

This is the weekly post that aggregates all the charts we put together throughout the week and organizes them all into one, easy to flip through deck.

From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts

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.

Here’s this week’s list:

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From the Desk of Ian Culley @IanCulley

Buying opportunities abound across commodities.

It’s easy to miss this phenomenon if you’re solely focused on the major indexes, as the CRB Index and the Bloomberg Commodity Index $BCOM broke down earlier this month. 

Don’t let those charts mislead you. Plenty of sweet setups present themselves.

And the next chart is by far my favorite…

Cocoa!

Check out the five-year base in cocoa futures:

Cocoa is taking the shape of a potential ascending triangle. This pattern carries a bullish bias as buyers step in, creating a series of higher lows. 

Momentum is another bullish data point on the chart. Notice the 14-week RSI has held within a bullish regime since the initial thrust higher in early 2018. 

Cocoa futures provide a textbook...

Stocks stopped going down a long time ago.

In bear markets stocks go down in price.

In bear markets you get more and more stocks making new lows.

In bear markets the indexes don't keep putting up major gains quarter after quarter.

And so what's been happening in the current market environment?

The S&P500 is on track to put up another terrific quarter of returns - up over 5% so far for Q1 2023.

And remember, this comes after rallying over 7% in Q4 2022.

These are very impressive results for equities, despite all the gloom and doom they're telling your parents on the evening news.

Funny, as strong as stock market returns have been in America the past 2 quarters, European equities have been exponentially stronger.

The Euro STOXX 50 is up over 13% in Q1. And this comes after a monster quarter in Q4 last year where Europe rallied 25%.

These are some of the greatest stock market returns of all time.

Meanwhile, the glorified gossip columnists are telling you it's a crisis.

You see the difference?

Aha! moments often occur when we are faced with a problem or a situation that requires us to think outside the box. They can happen when we are struggling to find a solution to a problem, and suddenly, a new idea pops into our heads.

Think about the story of Archimedes, who had an Aha! moment when he saw the water in his bathtub overflow. Suddenly, he realized that the volume of an object can be measured by the amount of water it displaces.

Another example of an Aha! moment is when we finally understand a concept that we have been struggling with for a long time. It can be a concept in mathematics, science, or even in our personal lives. For me, they often happen in my world of trading.

In fact, I would argue that a career spent engaged in trading the markets by definition is a...

From the Desk of Ian Culley @IanCulley

Bonds are taking a breather as stocks recover.

Bond market volatility is cooling off as the banking collapses and the March Fed meeting fade from the front page. 

And it appears the volatility has left big unresolved bases in US Treasuries in its wake…

Let’s dive in!

Check out the US 30-year T-Bond futures carving out a multi-month reversal pattern:

If and when it breaks above 132’18, I’m long with an upside objective of 143’00. Simple!

It’s the most attractive setup due to the bullish momentum regime and clean breakout level – two attributes short-duration bonds lack.

Why? 

Volatility increases further down the curve as the bond market anticipates the Fed’s next move. 

Check out the 10-year T-Note futures:

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From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!

One way we're doing this is by identifying 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.

Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey...

[9/7: updated stop to 48. We're already #FreeRiding here, so whatever we sell the remaining portion of the position for is pure profit!]

According to "the news," Americans can't afford to buy homes and rising mortgage costs will only deepen the problem.

Cool story, bro.

Do you know what disagrees? The price of virtually every publicly traded homebuilding company. We're already long Lennar and Toll Brothers which continue to work for us.

Next up is KB Homes $KBH, which appears to be on the verge of a big breakout following a welcome response to its recent earnings report.

From the Desk of Ian Culley @IanCulley

Commercial hedgers are taking an interest in the Canadian dollar. 

The CFTC has finally updated its records after the recent data breach.

And, as expected, we have some extreme positioning on our hands…

Check out the chart of Canadian dollar futures with the Commitment of Traders Report (COT) in the lower pane (red line for commercials, black for large speculators, and gray for small speculators):

Commercials hold their largest net-long position since early 2019. Extreme positioning such as this tends to mark key inflection points.

Why?

Because commercial hedgers represent the largest short sellers for any given market. And strong hands move markets.

Bottom line: When commercials get this bulled up on the Canadian dollar, forceful uptrends often follow as they unwind their position.

The stage is set for a rally, but it all comes down to price.

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