For this month, the cycle/relative strength concept is being applied to the S&P 500 stocks. The top best traditional performers in the month are being screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month, while stocks that are both weak monthly performers and weak relative performers are short sales for the month. The markets are expected to be weak, so this strategy aims to capitalize on potential market downturns.
Since January 2022, the top five long stocks selected using this strategy have outperformed the short sales by 138%, exceeding the S&P 500 by 56%. The short sales, on the other hand, fell by about 31%. In April, the long selections fell by 0.67% compared to -2.64% for the benchmark and a -4.30% drop for the short selections. This shows the potential effectiveness of this strategy in navigating volatile market conditions and outperforming market benchmarks.
The top five long recommendations for this month include Micron (MU), Progressive (PGR), Hasbro (HAS), Wells Fargo (WFC), and American Express (AXP). On the other hand, the top five short recommendations for this month are Healthpeak Properties (PEAK), Walgreen Boots (WBA), Globe Life (GL), PENN Entertainment (PENN), and Old Dominion Freight Line (ODFL). These recommendations are based on the cycle/relative strength concept and aim to provide investors with opportunities for positive returns in the month ahead.
Hasbro is in a new relative uptrend with a positive earnings report, breaking a two-year downtrend in the weekly strip, and showing higher lows in momentum on the monthly chart. The stock is not overbought and could potentially add $8 to $10 to its current price of around $70. Hasbro has historically risen 64% of the time in the month of May over the last 44 years, adding to the potential bullish case for the stock. On the other hand, Old Dominion Freight Line is an extended stock that remains overbought and has broken down, suggesting room for further downside. The stock has broken a relative strength trend line from 2019 and may be headed towards the $150-$160 level.
Overall, the cycle/relative strength concept is being applied to the S&P 500 stocks to identify potential buying and shorting opportunities for the month ahead. The strategy aims to capitalize on market weakness by selecting top performing stocks while selling short weak performers. The top five long and short recommendations for this month have historical data to support their potential performance, providing investors with a framework for navigating market volatility and potentially maximizing returns. By combining cycle analysis and relative strength measures, investors can make more informed decisions and potentially outperform market benchmarks in the month ahead.
