What an incredible week. Not only for momentum stocks, but for almost any other stocks. The St50 index gained 5.18%, the top 10 ranked stocks on the list appreciated 6.6%, and all major market indexes jumped 4% or more.
Last week, we mentioned that there is a large number of great looking long setups. Without a deal, most of them probably would not trigger or would fail. The deal is a fact. I don’t know if the fiscal cliff has been averted for the average citizen, but the market voted with both hands. A lot of scared, side-lined money jumped back and my suspicion is that there is more left in a waiting position.
The majority of hedge funds had to performance-chase their benchmarks for the most part of 2012. Three trading days into the new year, they are in the same precarious position. Most entered 2013 underinvested. The gap on January 2nd caught a lot of people by surprise.
The big winners of 2012, shined in the early hours of 2013 as well.
Staffing and outsourcing agencies keep making all-time highs. $ASGN gained another 16% last week. It was a $12-stock when it first appeared on the list last year.
“There is no high for a concept stock. It is always better to be long before they have already moved a lot than to try to figure out where to go short.” I forgot who says that in Hedge Fund Market Wizards, but it is spot on when it comes to 3D-printing stocks $DDD and $SSYS. They are still the hottest story stocks.
I don’t remember the last time there were so many financial stocks on the St50 list, but that sector has been on fire lately, so it was just a matter of time. So many regional and foreign banks are just breaking out from multi-year consolidations and they will probably attract the attention of capital that doesn’t want to chase extended names from other industry groups.
Keep in mind that extreme readings usually lead to consolidation through price or time. In terms of risk to reward, there aren’t as many setups as there were last Friday, which is absolutely natural after such a monstrous week. Many momentum stocks on the list are extended, up 3-4 days in a row. It is not wise to chase them. The move last week was relentless and all-encompassing. From here on, we will probably see more of a “market of stocks” environment and sector rotation. Earnings season is at the gates, which means that individual catalysts will trump everything else.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!