The cycle/relative strength concept is being applied to the S&P 500 stocks this month, ranking them from best to worst performers and screening them for relative strength. The top performing stocks are considered buys for the month, while those that are weak performers in both areas are short sales. It is expected that the markets will be weak in June.
Back testing of S&P 500 stocks with at least 30 years of data has shown that the top five long stocks have outperformed short sales by 112% since January 2022, exceeding the S&P 500 by 51%. The short sales, on the other hand, fell by approximately 30%.
The top five long recommendations for this month include Citigroup, Costco, Progressive, Eli Lilly, and Johnson Controls. Citigroup is the highest-ranked stock and shows signs of a potential uptrend with higher lows in monthly momentum. The monthly cycle has lifted the share price and is expected to continue doing so.
On the other hand, the top five short recommendations for this month are Old Dominion Freight Line, Intel, Evergy Inc., V.F. Corporation, and Penn Entertainment. Old Dominion Freight Line was also recommended as a shorting candidate last month and has fallen by 5.3%. Penn Entertainment, in particular, appears ripe for a short sale as it has been weak technically and the monthly cycle peaks now.
Overall, it is recommended to buy stocks that are strong performers both traditionally and in terms of relative strength, while short selling those that are weak in both areas. By following this strategy, investors can potentially outperform the market and achieve higher returns. It is important to consider the monthly cycle and relative strength of stocks when making investment decisions.
